The Financial Conduct Authority has said fund management firms have ‘significantly improved’ their assessments of the value they deliver.
In a report published today, 10 August, the FCA said following its review of value assessments, it has found that many firms have better practices in place, but some still require improvement.
The ongoing process of scrutinising and raising the value fund managers deliver to their clients began with the 2017 Asset Management Market Study. It found evidence of ‘weak demand-side pressure’ on fund prices, resulting in ‘uncompetitive outcomes for investors.’
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Since then, the FCA said it has worked closely with the industry to encourage a greater focus on assessment of value, and drive improved value for money for investors.
In the authorised fund managers’ assessments of fund value 2023 report, the FCA said many firms now have a better understanding of the rules and have significantly improved their assessment of value processes.
Most firms are making fewer assumptions within their analysis that they cannot evidence as reasonable, and are presenting higher quality management information to boards and assessment of value committees.
The FCA warned that while firms had a better understanding of the need to justify fund fees, most remedial action did not involve cutting them.
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Where fees were cut, the reductions were almost always driven by ‘adverse comparable market rates findings’ rather than other considerations.
This suggests that fund managers continue to cluster around price points, which is something the FCA earlier identified as a market failure.
The regulator said it expects firms to consider the findings of today’s report and to make improvements where required.
Camille Blackburn, director of wholesale buy-side at the FCA, commented: “Authorised fund manager boards and senior managers are responsible for ensuring value assessments are carried out properly and any issues found are resolved quickly.
“It is vital that firms make sure they are not solely focused on a fund’s profitability over value for money for investors. The Consumer Duty, which is now in place, further supports our expectations in this area.”
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