Asset managers under FCA spotlight

Under the spotlight

Asset management firms are set to come under scrutiny from the City authorities as to whether they add real value for money - and whether the market is competitive enough to benefit investors.

The Financial Conduct Authority (FCA), the force that watches over and regulates UK financial services, has set out the details of a review into the £6.6 trillion UK asset management industry, and has warned that firms could face disciplinary action if it doesn't like what it finds.

A broader review of competition in financial services in 2014 raised some concerns - namely the difficulty for investors of determining value for money and monitoring their asset managers' performance; and the bundling of other services of questionable quality.

Innovative business models

The new review, announced in February but only outlined in detail on Wednesday, will follow these issues up, looking at how asset managers for retail and institutional investors compete to deliver value; if asset managers are motivated and able to control costs; and what effect investment consultants have on competition for institutional investment.

It will also consider whether any barriers to innovation or technological advances exist - and the FCA has said it might even repeal existing rules to allow more innovative business models to launch.

Christopher Woolard, director of strategy and competition at the FCA, says: 'Asset managers provide an important economic function, bringing together those with money to invest and companies and governments that need capital.

'Given the significant role they play in the economy, it is essential that competition works effectively for these services.'

Earlier this year the FCA also revealed it was considering a review of so-called 'closet tracker' funds as part of a wider look at competition in the fund management industry.

After speaking to members of industry and other relevant parties, the FCA will aim to publish preliminary findings next summer, and a final report in early 2017.

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