The FCA’s final report into competition in the asset management sector is here, but as is the way with regulatory papers these days, there does not seem to be that much that is final about it.
The findings are pretty damning but it is the reform package that has been found wanting, particularly among consumer representatives.
So let’s dig a bit deeper into what the FCA has said. First of all, the regulator wants fund groups to act to deliver better value for money. Advisers have been quick to point out the FCA is hardly the paragon of virtue on this topic. But that aside, Money Marketing has often argued value for money is a laudable aim but difficult to measure in practice, especially where services and products differ so much.
The jury is still out on whether efforts to bring about value for money on the workplace pensions side, through the introduction of independent governance committees, are affecting real change.
As part of the value for money endeavour, the FCA is also considering switching off trail on all pre-RDR investments. Advisers receiving trail where they are not giving advice does not sit well in a world of an evolved, advice profession. But equally, the idea of fund groups seeking regulatory permission to move investors into cheaper share classes is laughable.
Common sense would dictate the FCA is unlikely to have a problem with investors paying less. One gets the sense that the clamour for regulatory clarity is more about getting everyone to switch off pre-RDR trail at the same time, so as not to be hit by first-mover disadvantage.
Secondly, we have a commitment to the all-in fee, including transaction costs. It has been argued this would make it more difficult to compare products, though I cannot see neither the regulator nor the consumer groups buying that argument.
Thirdly, there will be further work into making fund objectives more clear and into the role of benchmarks and performance reporting. This should be tackled as a priority – choosing benchmarks that suit a particular fund rather than provide an accurate measure of comparison falls far short of the FCA’s mantra of clear, fair and not misleading.
The FCA also seems to be concerned about platforms, and vertically integrated firms. Vertical integration is one thing, and as these models grow in prominence it is right that they are scrutinised. But this should not descend into yet another review into advice. If the concern is “excessive profit margins”, quality financial planning firms are not the place to look.
Natalie Holt is editor of Money Marketing. Follow her on Twitter @Natalie_Holt_MM