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FCA proposes remedies following asset management sector market study

28 June 2017

The FCA today published the final findings of its asset management market study and it has announced the remedies that will be implemented to address the concerns previously identified.

The FCA's final report came after it had published the original terms of reference for the asset management market study in November 2015. Following its terms of reference, the FCA conducted analysis of over 20,000 shareclasses and 30,000 investment strategies.

The FCA published its interim report in November, setting out the FCA's provisional view on the way competition works for asset management services, the resulting outcomes for investors and its proposed remedies to address the identified issues.

Key findings

Having considered the feedback it received the FCA has now confirmed that the following key findings set out in the interim report are to be final:

  • Price competition is weak in a number of areas of the sector;
  • Despite a large number of firms operating in the market there was evidence of sustained, high profits over a number of years;
  • Investors are not always clear what the objectives of funds are;
  • Fund performance is not always reported against an appropriate benchmark; and
  • There were concerns about the way the investment consultant market operates.


The FCA has decided to take forward a package of remedies, which it believes, will make competition work better in the asset management sector and will protect those least able to actively engage with their asset manager. The FCA believes that these remedies will lead to the UK asset management industry being a more attractive place for investors and so improve the relative competitiveness of the UK market.

These remedies fall in to three broad areas.

  • Provide protection for investors who are not well placed to find better value for money – to do this the FCA intends to:
    • strengthen the duty on fund managers to act in the best interests of investors and use the Senior Managers Regime to deliver individual focus and accountability;
    • require fund managers to appoint a minimum of two independent directors to their boards;
    • introduce changes to improve fairness around the management of share classes and the way in which fund managers profit from investors buying and selling their funds. 
  • Drive competitive pressure on asset managers – to achieve this the FCA will:
    • support the disclosure of a single, all-in-fee to investors;
    • support the consistent and standardised disclosure of costs and charges to institutional investors;
    • recommend that the DWP remove barriers to pension scheme consolidation and pooling;
    • chair a working group to focus on how to make fund objectives more useful and consult on how benchmarks are used and performance reported.
  • Improve the effectiveness of intermediaries – to achieve this the FCA will:
    • launch a market study into investment platforms;
    • seek views on rejecting the undertakings in lieu of a market investigation reference regarding the institutional advice market to the CMA;
    • recommend that HM Treasury considers bringing investment consultants into the FCA’s regulatory perimeter.

The implementation of the remedies will take place in a number of stages.

Additionally the FCA has published a separate consultation paper alongside the final report setting out its proposals in relation to fund governance, risk-free box profits and share class switching. The FCA is also consulting on its provisional view to reject the undertakings in lieu of a market investigation reference of investment consultancy services .

Some remedies will require further work in light of other legislative initiatives, including MiFID II and will be consulted on later in the year. Finally some of the measures are dependent on the outcomes of the proposed working groups.  There is plenty to digest and much further work promised but it seems the upshot will be less onerous on the asset management sector than feared.

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