Britain to give investors better value

Investors get poor value for money from Britain’s £7 trillion (Dh32 trillion) asset management industry because there is not enough competition and a lack of transparency on fees, the industry regulator said on Friday.

To remedy this situation, the Financial Conduct Authority has proposed a single fee for investors in funds in the world’s second largest asset management market but has stopped short of recommending a cap on fees.

It also launched a consultation into whether the investment consultancy market should be referred to Britain’s Competition and Markets Authority for a full blown antitrust probe. This market, which advises funds on asset manager selection and investment products, is outside the FCA’s remit.

Just three companies account for 60 per cent of the consultancy market, the report said.

“There is a strong culture of gifts and hospitality in the investment consultancy sector which could influence the ratings given to managers,” the FCA said.

Analysts said a single fee would allow investors to see upfront for the first time how much they are paying for trading costs.

“The eye-catching headline is the proposed introduction of an all-in fee so that investors can easily see what is being taken from the fund,” Paul McGinnis, analyst at Shore Capital, said in a note.

The difference from the existing fee structure “could be that these measures contain certain costs [including transaction costs] that are not known in advance by the investor”, McGinnis said.

FCA Chief Executive Andrew Bailey said the watchdog wanted to make sure that asset managers were “pursuing energetically” their duty to act in their customers’ best interests so investors got value for money.