The FCA delivered its final report this week, telling fund managers to disclose a single, “all-in” fee to investors to help tackle weak price competition as part of a radical overhaul.
Matthew Phillips, managing director, Thomas Miller Investment, said: “I find it hard to believe that an industry, running at a 30% profit margin, and where historically every company has charged a 1.5% annual management charge saying it was all about performance, at best looks like “price clustering” and worse looks like a cartel. The upcoming European Directive though MIFID II will address much of this.”
He said: “We welcome any move that leads to greater transparency in total costs and improves competition.
“Those managers who truly perform over the longer term will be rightly rewarded. We hope that those that don’t perform will be weeded out by increased competition and transparency.”
Patricia Regnault, Europe head of asset management at Linedata, the leading international software and technology provider, said: “At first glance the requirements for increased transparency on prices look tough for asset managers. But if we take a step back, these proposals should help the buy side industry to remain sustainable and grow stronger.
“Why should the active asset managers be afraid to communicate the real price of the services that they deliver?
“The large majority provide a high level of expertise combined with great professionalism to help investors achieve their goals. Investors accept that they have to pay for specialised, quality investment services. Transparency will benefit all parties and pull the industry toward excellence in service and investment performance.”
Kay Ingram, director of public policy at adviser group LEBC, said: “Making the cost of fund management more transparent and driving competition will help consumers to better understand what they are paying for.
“While the retail investment market is already subject to competition, led by the independent advice sector, there is room for improvement and we welcome those proposals which will bring this about.
“However the most important proposal is to extend scrutiny and promote greater competition in the occupational defined contribution market.
“Individual scheme members have no means of bringing competition to bear on the cost of employer sponsored defined contribution funds, even though it is they who are paying from their pension pot for them. Some schemes are no longer competitively priced and have not passed on cost savings to the members. A spotlight on this is a welcome development”.
Ola Abdul, CEO of IFA investment platform Fundment, said: ''The FCA’s report is a wake-up call for the entire asset management industry.
‘’The way it highlights the negative link between net returns and charges is quite damning. There is no question that asset managers need to reform to reduce costs and serve their customers better.
''The report makes abundantly clear that the best interest of the client, including how much they are charged in fees, must be front and centre at all times.
“The obvious solution is embracing better technology - something the entire industry has been inexplicably slow to adopt.''