The Financial Conduct Authority (FCA) has published a report setting out its regulatory priorities for what it terms the ‘wholesale buy-side’.
The regulator said while the UK is the largest asset management centre in Europe, and second globally, many people continue to hold all their money as cash, missing out on the benefits of investing.
At the outset, the FCA also noted the ‘meaningful pressures on business models’ the investment industry is grappling with.
Against this backdrop, the report explains the watchdog’s work will focus on four key areas.
First, the FCA will ‘evolve regulation to foster growth and innovation and serve changing consumer needs’.
This will require asset managers and others to implement robust governance for emerging technologies, and establish clear accountability, risk management and artificial intelligence (AI) oversight measures.
Next, the FCA will focus on ‘delivering good outcomes to consumers’. What this will mean in practice for asset managers is a requirement to further embed the consumer duty, take an ‘outcomes-based’ approach and apply a ‘consumer lens’ to products and services.
Firms will also need to improve clarity of communications with clients and implement effective oversight of appointed representatives.
See also: AI in financial services needs behavioural foundations
The third priority is to ‘reinforce consistent, high standards’ across private markets investing.
Asset managers operating in this area will have to review and update governance and processes for valuations, ensure robust processes are in place for identification of conflicts of interest, and align product development for retail and retirement products with consumer duty expectations.
The final area is to preserve market integrity and promote resilience to disruption.
This will mean asset managers and others need to strengthen operational resilience, embed it into processes such as new product design, and maintain robust incident response and recovery plans, among other things.
Michelle Beck, director of buy side at the FCA, said: “We are providing a single clear view of our priorities for buy side firms and the investors they serve.
“By supporting innovation and improving resilience we can help maintain the UK’s leading position as the largest asset management centre in Europe and second globally.”
