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FCA urged to abandon ‘all-in fee’ proposal

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Asset managers have urged the FCA to abandon the “all-in fee” proposal suggested in its interim study on competition and rethink how managers’ incentives are calculated.

In November, the regulator put forward a number of reforms for the market, including an all-in fee, which would force disclosure of transaction costs in a fund’s total costs.

In their responses to the FCA’s study, Old Mutual Global Investors and Vanguard argue having a single fee could lead to unexpected charges throughout the year, such as trading costs and stamp duty, which are normally excluded in annual management fees.

Sean Hagerty, head of Vanguard’s European business, said Vanguard is advocating for “a radically simpler” fees template to be developed to replace existing disclosure documents.

Hagerty says: “Investors need to be put in a better position to understand how their investments could perform, and how indeed they are performing. The fund industry, and individual fund providers, should be delivering simpler information to help investors make better informed decisions.”

Vanguard also says fund fees are “the best indicator of future returns” equal to past performance, and has suggested low-cost funds have tended to outperform high-cost funds over time.

In its response to the regulator, OMGI says a single charge could pose “an unintended conflict of interest” between the asset management company and investors because it incentivises a lower the level of trading, the FT reports.

In another response, seen by Money Marketing, Orbis Investments urges the regulator to focus on the current fee model that incentivise firms to grow assets under management, which is not necessarily aligned with investors’ best interests.

Orbis Investments UK head Dan Brocklebank says: “We have always believed in pay for performance – to us, it seems common sense. However, we recognise that no performance fee is perfect but a fee structure that is based on the principle of symmetry where a manager does not receive a fee unless it outperforms is the fairest and most transparent way to operate.”

“The key problem is an agency issue.  We believe if you align the interests of the manager and clients through a properly designed fee structure, it will be in the interests of the manager to ensure that costs incurred represent value, as they will effectively be paying a share of all of those fees.

Orbis has previously said to be “nervous” about the FCA’s recommendations around transaction costs.



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  1. How about reporting the last 5 years total costs as an average figure?

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