On 18th of November, the Financial Conduct Authority (FCA) announced further details on its market study into UK’s asset management industry, as part of wider efforts to promote fair, transparent and competitive financial markets.
First signposted in its March 2015 Business Plan, the FCA will review how asset managers compete with each other and whether they are motivated — and able — to control costs across their value chain. The primary focus will be on costs and fees paid by clients, continuing a long-running FCA review of asset managers that started with Martin Wheatley’s speech at the Financial Services Authority (FSA) asset management conference in 2012.
Since then the market has evolved but despite continued market forces pushing down fees (e.g. low barriers to entry), the FCA believes that a lack of competition may result in clients paying too much. As such, average profitability is high in the sector which earns 13 billion pounds in fees annually, a common warning sign for regulators. In particular, the FCA believes that fees and charges are not always transparent or linked to the costs incurred. Therefore, it can be difficult for clients to assess whether they are getting value for money.
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