The Financial Conduct Authority is planning to investigate complex fund management charges and the extent to which they harm consumers.
In its business plan for 2013/14, published today, the FCA says fund management fees have risen over the last 10 years, additional “hidden” charges have increased and charging structures have become more complex as performance fees have become more common.
The regulator says there is evidence fee structures may exploit consumer behaviour, such as through complex charging structures that make price comparisons difficult.
The FCA is concerned firms are applying more complex fee structures to retail customers than institutional clients, and that the long-term impact of small increases in annual charges are being downplayed.
The FCA says: “In 2013/14 we will undertake a project that will highlight the behaviours and practices of asset management firms in relation to charging structures that harm consumers.
“Initial evidence suggests fund fees are high in the UK compared to comparable markets and charging structures do not promote informed consumer choice.”
The regulator has also raised concerns about “highly intermediated markets” where distributors along the product chain can charge fees at multiple stages of the investment process.