The Financial Conduct Authority is to shine a spotlight on fund fees and performance as it assesses price clustering in the investment industry, its business plan for 2019/20 reveals.
In its next annual report, the UK regulator will publish a summary of asset manager profitability alongside fees and performance data on funds, broken down by passive and active products. The data will be anonymised and published annually from the 2019/2020 annual report onwards.
In some asset class sectors, the FCA will also publish price trends for both active and passive funds.
The metrics will be used to assess progress in price clustering concerns raised by the regulator in the asset management market study. In its interim report, published in November 2016, the FCA found actively managed equity funds with assets higher than £100m tended to charge 0.75% to 1%. Economies of scale were not passed on and fees had remained stagnant for around a decade, the interim report said.
Research conducted by SCM Direct in March the following year stated 70% of active equity funds charged 0.75% prompting co-founder Gina Miller to accuse the industry of price collusion “whether formally or informally”.
Brexit to dominate FCA’s business year
Across the financial services industry, the UK regulator acknowledged Brexit is due to dominate its work over the next year but outlined four cross-sector priorities in its 2019/20 plan. These include: the senior managers and certification regime expanding to all firms; the fair treatment of existing customers; operational resilience; and combatting financial crime and money laundering.
Within the investment management section of the FCA’s business plan, stewardship, a Priips review, rules and guidance on illiquid assets in open-ended funds, implementation of asset management market study changes and an updated prudential regime were highlighted as areas of focus.
The European Union’s revised Shareholder Rights Directive (SRD II) would be implemented in “due course” while the FCA is working with firms to address concerns raised about Priips that were published in its feedback statement in February 2019. Final rules and guidance on illiquid assets in open-ended funds will be published before the end of Q2.
Speaking about the business plan as a whole, FCA chief executive Andrew Bailey (pictured) said: “Dealing with Brexit will be the most immediate challenge we face. But this plan also commits us to a stretching programme of work across the financial sector.
“In order to ensure we are a regulator that continues to serve the public interest, we need to adapt to the ever-changing environment. This is why the future of regulation is a key priority in this year’s Business Plan. We will be leading a debate about this with stakeholders so that we can keep pace with the developments taking place in the markets that we regulate and in wider society.”
