UK asset managers told to be clear on fees
Asset managers are calculating transaction costs for products inconsistently and sometimes inaccurately, raising the risk of confusing retail investors, says Britain’s Financial Conduct Authority (FCA).
The watchdog is looking at how to improve “value for money” for retail and institutional investors by making it easier to compare products and clarity on costs and fees. “Asset managers should review their cost disclosures to ensure they are clear, fair and not misleading,” the FCA said on Thursday.
It follows a review that began in 2018 into the effect of new EU product disclosure rules, known as PRIIPs, and into a sweeping revision of EU securities rules, known as MiFID II.
“While awareness of the rules appears good, we found that firms take inconsistent approaches, risking confusion for customers, who may be misled about how much they are being charged,” FCA CEO Andrew Bailey said.
“We are aware that many firms are finding aspects of the calculations difficult or are making inaccurate calculations. We will work with firms to help them ensure their reporting is accurate,” he said
But Bailey said public claims that asset managers were deliberately not complying with the new rules had not been supported by the evidence. Wealth managers and retail platforms that sell products were also interpreting the new disclosure rules inconsistently in some cases, making it hard for investors to compare products properly, the FCA said.
In February this year, the FCA gave asset managers a year to introduce a common “template” spelling out costs and fees to large customers such as pension schemes.
The Investment Association, an industry body, said asset managers were committed to applying the EU rules and would work with the FCA to ensure that customers get reliable, clear and meaningful information.
PRIIPs, or packaged retail investment and insurance products, require sellers of investment funds, life insurance and some pension schemes to disclose specific information.
The FCA said it will work with EU regulators who are reviewing the law.