It can be very frustrating for those, like me, who’ve been campaigning for improvements to the UK fund industry, to see things changing quite so slowly.
Successive reports by regulators over the last two decades have highlighted a whole host of problems which militate against good consumer outcomes. These include a lack of transparency around fees and charges, misleading reporting of fund performance, and all sorts of conflicts of interest.
Thankfully now, after all these years, we finally seem to be getting somewhere. Last year the Financial Conduct Authority released a scathing report on competition in UK asset management and warned the industry that it would be rolling out a series of measures to address its concerns.
The FCA has now begun that process by announcing a series of initial steps. They include a requirement for fund managers to make an annual assessment of the value their funds provide and to appoint a minimum of two independent directors to their boards. The FCA is also making senior managers more accountable for ensuring that firms act in the best interests of their clients; and, finally, it’s making technical changes to facilitate the moving of investors’ money into cheaper share classes.
Commenting on the announcement, the FCA’s Executive Director Christopher Woolard said the steps set out are “an important part of a package of measures that, combined, aim to achieve a fair, transparent, open and accountable market.”
My Transparency Task Force colleague Andy Agathangelou was also positive. “I particularly like the requirement for greater accountability for senior decision-makers,” he said, “because I’m a firm believer in the idea that ‘accountability cures’. Culture is key and it is crystal clear the FCA fully understand that.
“I also like the way the FCA have given themselves licence to tighten the noose in key areas if they need to. A good example is the way the Independent Directors role is going to be played out; the FCA have the capacity to raise the bar as and when they need to, and that’s an intelligent approach.”
Others, though, have been less impressed by the FCA’s announcement. Mick McAteer, head of the Financial Inclusion Centre, told the FT: “It’s a bit of a damp squib [and] very unlikely to lead to significant improvements in the asset management industry. The stuff on governance is OK but [there is] still no requirement to have an independent chair.”
Even less enamoured with these latest measures is Gina Miller. Better known for lobbying against a “hard” Brexit, Gina has campaigned for greater transparency in asset management for many years. In a statement she said: “It is shocking how long it has taken the FCA to achieve nothing more than restating the obvious. They have dealt with important but relatively minor negative industry malpractices, such as box profits, but not the substantive issue of misleading fees through the various distribution channels.”
My own view lies somewhere between Andy’s on the one hand, and Mick and Gina’s on the other. This is a step, albeit a small one, in the right direction. That said, if there’s one thing I’ve learned about this subject over the years, it’s that we should never underestimate the power of the industry lobby.
The Investment Association and most of its members, aided and abetted by the trade press, will continue to give the impression that lack of competition in asset management has been overblown. They will try to hold back the tide of progress for as long as they can.
The good news is that investors need not be disadvantaged by the glacial pace of change in the fund industry. There are fund providers that already act in their clients’ best interests, whose fees and charges are reasonable, and that don’t make unjustified claims about the performance of their funds.
We at RockWealth will continue to work with those companies to ensure the best possible outcomes for our clients.
You can read the FCA’s latest announcement here: