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10 industry voices on 'sensible' FCA asset management policy

The Financial Conduct Authority (FCA) has today published its plans to tackle issues highlighted by the asset management study published last year that include several rules changes.

The Financial Conduct Authority (FCA) has today published its plan to tackle issues highlighted by the asset management study released last year.

The plan includes several rule changes such as an overhaul of fund governance, a prohibition on performance fees based on gross performance and box profits as well as a new requirement that fund managers will have to ‘prove value’ annually.

The preliminary findings of the report and proposed rule changes have been widely discussed before the publication of the report.

The industry largely welcomed today’s announcement, with most reactions hailing the 'sensible' rule changes.

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The Financial Conduct Authority (FCA) has today published its plan to tackle issues highlighted by the asset management study released last year.

The plan includes several rule changes such as an overhaul of fund governance, a prohibition on performance fees based on gross performance and box profits as well as a new requirement that fund managers will have to ‘prove value’ annually.

The preliminary findings of the report and proposed rule changes have been widely discussed before the publication of the report.

The industry largely welcomed today’s announcement, with most reactions hailing the 'sensible' rule changes.

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Kevin Doran, chief investment officer, AJ Bell

'The asset management industry is ripe for change.  Investors need better choices, better value and better communication from fund providers and so we support wholeheartedly the FCA’s drive to deliver better information and value to investors. 

'For far too long, many fund providers seem to have forgotten just whose money it is they manage, hiding behind vague objectives and excessive charges.

'The occasional paper on behavioural remedies for improving consumer understanding and awareness of charges is particularly interesting. Point of sale disclosure is an area we have done our own behavioural research in and it is clear that huge improvements can be made in this area to help consumers.  We look forward to engaging with the regulator on this.'

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Martin Gilbert, co-chief executive, Aberdeen Standard Investments

'We are very supportive of the FCA’s changes and are well advanced in adopting the package of measures ahead of the deadline set by the FCA. Aberdeen Standard Investments has been undertaking value for money analysis on a trial basis for some time so we are well placed to implement the FCA’s recommendations.

'It is also our intention to appoint two independent non-executive directors to our principal UK management company, one of whom will act as chair. We expect that they will represent 40% of the board of our UK ManCo. In my experience, independent directors can play an important role in representing the interests fund shareholders.

'Overall the FCA’s package of policies will benefit investors as they will ultimately improve the way the asset management industry works and serves its customers.'

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Saker Nusseibeh, chief executive, Hermes Investment Management

'We welcome the FCA’s announcement on the latest steps in implementing the asset management market study.

'Our responsibility team is accountable for developing and integrating responsibility across the business alongside the investment office, which is answerable to clients for the investment teams’ consistent delivery of responsible, risk-adjusted performance and adherence to the processes which earned them their ‘kitemarks’.

'As an active manager with high active share, we share the view that true active management is rare, but that transparency is an integral part of the reporting process. However, one area where we would welcome more dialogue, is around stewardship.

'It is our view that stewardship is a vital element of fund management, and should be seen as the ultimate goal of the industry in order to contribute to a more sustainable form of capitalism over the long-term. We strongly believe that stewardship generates value add over the long-term for all stakeholders, helping people invest better, retire better and create a better society for all.'

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Shaun Port, chief investment officer, Nutmeg

'High costs and charges can significantly erode the money people are investing for their future. While cost shouldn’t be the only factor considered when making an investment choice, it is vital that all investors have a clear understanding of what they are paying and it is easy for them to compare like-for-like costs.

'A change in behaviour is long overdue and the FCA should be prepared to take action on any firms dragging their feet.

'At Nutmeg, we have opted to clearly set out all fees and charges both as a percentage and in pounds and pence before a customer invests with us. As an online only wealth manager, we’re well positioned to clearly show customers the impact of costs and charges on their investments and to respond quickly to customer testing and feedback.'

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Andrew Strange, director, PwC

'Delivering value for money for investors has always been a key tenet of the asset management industry. Changes to focus on wider value, rather than just charges, will better enable firms to demonstrate this value to their customers, although the new public statements could risk overloading consumers with information. 

'However, updating guidance to make it easier for firms to switch investors to cheaper versions of the same fund is an example of the regulator helping firms deliver value.

'Increased implementation periods to appoint independent non-excutive directors (NEDs) will be welcome, but still doesn't account for the potential de-scoping of NED authorisations under the SM&CR. Until the scope of SM&CR is clear, it's possible some firms could have to bear the cost of authorising a NED, before almost immediately deauthorising them under the new regime.

'Independent NEDs can bring an important perspective to a board, but they are not a panacea and must be seen in the context of wider governance and board specialism.'

 

 

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Simon Turner, partner, EY

'Today’s announcement demonstrates that the focus is on outcomes, not just price. The industry has been waiting for these final rules to be published, and can now get on with ensuring they offer the best value for money for investors, fair products and services, and an independent governance structure, which aligns closer to global standards.

'A key part of today’s announcement is the step change in how authorised fund managers (AFMs) operate going forward. The requirement to appoint independent directors to the board reinforces the regulator’s commitment to make governance a major element in investor protection, and gives clarity to what AFMs now need to consider when acting for their clients, which in its most basic form is to focus on good outcomes, not just rock bottom prices.

'This change will align the UK fund industry more closely to global standards of governance.'

 

 

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David Barron, CEO, Miton Group

'The FCA statement highlights that the real issue is about whether the industry delivers meaningful value to investors so the revised focus on value is to be welcomed. Low costs don’t necessarily equate to value, which is a much broader issue.

'The remedies proposed are sensible and the recognition that the previously suggested value for money approach should become a broader assessment of value is welcome. We are also pleased to see a further consultation on objectives and benchmarks. What a fund seeks to achieve and how, and whether it delivers, is central to the value assessment.

'We believe that a manager offering differentiated yet straightforward active strategies with the prospect of good long-term returns after all costs, adds the real value. We aim to deliver this through funds that are unconstrained by benchmarks and we empower our managers to invest according to their convictions.'

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Chris Cummings, chief executive, Investment Association

'We welcome the FCA’s announcement today on the latest steps in implementing the asset management market study.

'Our industry is committed to demonstrating, and delivering, good value to the millions of people who entrust their savings to us. We welcome the FCA recognising that people judge their asset manager by investment performance and service, as well as cost. 

'We strongly support a greater emphasis on communication as well as governance to help customers better understand what they are investing in, what they are paying for and what they are getting in return.

'The IA is already working with the FCA in these important areas and looks forward to continuing this in the coming months.'

 

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Andrew Glessing, head of regulation, Alpha FMC

'The FCA’s consistent determination to initiate actions for asset managers after the market study is reflected in today’s policy statement.

'Far from kicking its proposed package of remedies into the long grass, as many commentators suggested last year, the FCA has remained committed to the direction of travel it set out through consultation.

'The nod to the senior managers’ regime is now a firm commitment and prescribed responsibilities will back up the FCA’s desire to see value for money demonstrated. Many will have been surprised by the FCA’s own research with consumers and the extent to which it expects fund managers to think creatively about making disclosure as effective as it can be.

'Asset managers will gear up to deal with this series of enhanced regulatory expectations, mindful of the range of complexity and clarity of the actions required – all in all this is a policy statement where the black and white sits alongside many shades of grey.'

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Richard Dowell, co-head of clients, Cardano

'Transparency, transparency, transparency! This has to be at the heart of the whole system. The industry needs to do away with the smoke and mirrors that has plagued the system for far too long. Today’s report is a step in the right direction strengthening the duty of investment managers to act in the best interests of investors and crucially, show how they actually do this.  

'While the FCA are proposing that fund charges are now assessed in the context of the overall value delivered, the definition of ‘value for money’ remains open to interpretation, and could cause headaches every year at the time of the proposed annual assessment.'

 

 

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