Percentages Ban FCA Wants Real Numbers Fees
Published / Last Updated on 28/06/2017
Percentages Ban FCA Wants Real Numbers Fees.
The Financial Conduct Authority (FCA) yesterday published results of its asset management industry review.
The review confirms that price competition is weak in a number of areas of the fund management industry. In short, plenty of asset and fund managers are around but their charging structures are so complicated with %s here and %s there meaning that it is difficult to compare to find who is actually the most competitive.
The FCA will be looking to make changes as follows to promote greater transparency and competition:
- strengthen the duty on fund managers to act in the best interests of investors and to make senior individuals accountability for this
- fund managers to appoint a minimum of two independent directors to their boards
- support the disclosure of a single, all-in-fee to investors
- support the consistent and standardised disclosure of costs and charges to institutional investors
- launch a market study into investment platforms
Comment
Long overdue!
When a pension company or investment company has say £900bn under management (that’s nine hundred thousand millions!). If they are disguising charges of say 1.5% pa, they are reaping in £1.35bn income a year, or put it another way that’s enough to pay 27,000 staff £0.5m a year and get them all to work from home, saving office and travel costs. Yet some of these big firms still have pension scheme deficits? So who’s getting the profits?
Yes, we know there are costs involved to run any business, but the reality is that it does not cost anywhere near £1.35bn a year to run one of the big, high street brand insurers or pension companies. Some people are making a lot of money, driving nice cars and getting great pensions, but the ‘gravy train’ is starting to slow down.
Any move that makes it clearer exactly how much you will pay, in numbers, for investment fund charges rather than %s means that you can compare investment funds and companies more easily to find the right deal for you.