FCA proposes reforms for U.K. asset-management industry

The U.K.’s Financial Conduct Authority (FCA) is proposing sweeping changes to the rules governing that country’s asset-management industry amid concerns about a lack of price competition and inadequate investor treatment.

The reforms, which are designed to increase efficiency and to make the U.K. asset-management industry more attractive to investors, were included in the FCA’s final report on the asset-management industry, which was published on Wednesday.

Specifically, the FCA is proposing to strengthen the duty for asset managers to act in the best interests of investors; require fund managers to appoint at least two independent directors; increase cost transparency; and introduce measures to provide investors with greater clarity on fund objectives and better performance reporting.

“We have put together a comprehensive package of reforms that will make competition work better and help both retail and institutional investors to make their money work well for them,” says Andrew Bailey, CEO of the FCA, in a statement.

The FCA’s final report confirms the regulator’s initial research, which found that price competition is weak in several areas of the asset-management industry.

“Despite a large number of firms operating in the market, the FCA’s analysis found evidence of sustained, high profits over a number of years,” the FCA’s report says.

In addition, the FCA also found that investors are not always clear what the objectives of funds are and that fund performance is not always reported against an appropriate benchmark. Finally, the FCA found concerns about the way the investment consultant market operates.

Along with the proposed reforms proposed, the FCA announced that it is also launching a study into investment platforms and, that it will recommend that the government give the regulator oversight of investment consultants.

Photo copyright: tashatuvango/123RF