The FCA has just completed a 2½ year investigation into the UKs £8.1 trillion fund management industry, focussing on operating practices and whether charges are excessive. The time taken to complete the investigation certainly seems excessive. It is difficult to imagine why more than 6 months was necessary. Presumably the investigators were on day rates. Anyway it has been revealed that the average fund management firm enjoys an operating profit of 36%, about 5 times that of the energy companies, who are our traditional whipping boys. The new rules require a senior manager at each firm to sign off an annual report examining whether its funds provide investors with value for money. This will include looking at their performance after charges and comparing this against rivals, which should give instant transparency. Well, not quite instant. It will be another 18 months before the requirements come into effect, making it 4 years since the investigation started. An elephant could have had two babies in that time.
Much will depend on the enthusiasm with which the FCA monitors compliance. Recent indications are not promising. More than 3 months after new EU rules came into effect, obliging fund managers to reveal the true costs of their products, it is claimed that many of the leading names are still not providing the required information. One small ’boutique’ investment firm is even threatening to take legal action against the FCA if it fails to clamp down harder. It follows from all of this that it is incumbent on advisory firms to pay particular attention to the charges and value for money of those charges of the fund managers which they use.
The above is the lead article in our latest monthly News Notes – April 2018. Other topics in this edition include:
- Wrinkly Credits
- Savings Theft
- Auto Enrolment
- Cold Calling
- Document Changes – General Data Protection Regulation
- PRIIPS Regulation
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