FCA calls for fund charge consistency

The recommendation to move away from using the annual management charge (AMC) in some marketing material and the ongoing charge in other documents (and to consistently use only the one) comes after a review of 11 firms of different sizes and business models that covered 29% of the UK retail market by assets under management.
According to the FCA, the use of only the OCF should help investors understand and compare charges.
“Firms must put consumers at the heart of their business model. That means it is important to
make comparing costs as easy as possible. As part of the overall relationship between firms and
consumers, firms need to manage the costs with as much tenacity as they produce returns, and
make the costs they charge clear, “ the regulatory body said.
The FCA also said, of the 11 firms reviewed, seven firms used the AMC as the headline charge figure, and thus “failed to provide investors with a clear, combined figure for charges”; seven firms had charging structures and information that were likely to be less than clear to investors; six firms made the charging structure unnecessarily complex by using administration charges “that did not correspond to specific administration costs  or adding performance fees; and the description of administration charges at three of the firms were unclear.
In response to the review Daniel Godfrey, Investment Management Association CEO, said: “The IMA’s guidance has long been that member firms should not refer to the AMC in marketing literature, but should exclusively refer to the OCF.  The OCF provides a common standard for all the known costs and charges that a fund will bear in a single comprehensive ratio that is easy to understand and to compare.”