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Investment fees: FCA plans shake-up to help investors Investment fees: FCA plans shake-up to help investors
(35 minutes later)
Investors should be quoted a single "all-in fee" so the amount taken in charges from their investment returns is clear, a regulator has said.Investors should be quoted a single "all-in fee" so the amount taken in charges from their investment returns is clear, a regulator has said.
The value of the invested savings and pensions of millions of people in the UK are dependant on asset managers.The value of the invested savings and pensions of millions of people in the UK are dependant on asset managers.
In a damning report, the Financial Conduct Authority (FCA) has said there is weak price competition, leaving customers paying high charges.In a damning report, the Financial Conduct Authority (FCA) has said there is weak price competition, leaving customers paying high charges.
An industry association said price transparency had been improving.An industry association said price transparency had been improving.
Value for money?Value for money?
The FCA has studied the asset management system for a year, and has now published its interim report.The FCA has studied the asset management system for a year, and has now published its interim report.
In a string of criticisms, it said that investors often paid high charges, there were examples of poor value for money in some funds, and that consultants could bring better results for pension savers.In a string of criticisms, it said that investors often paid high charges, there were examples of poor value for money in some funds, and that consultants could bring better results for pension savers.
"In today's world of persistently low interest rates, it is vital that we do everything possible to enable people to accumulate and earn a return on their savings which can meet their lifetime needs," said Andrew Bailey, chief executive of the FCA."In today's world of persistently low interest rates, it is vital that we do everything possible to enable people to accumulate and earn a return on their savings which can meet their lifetime needs," said Andrew Bailey, chief executive of the FCA.
"To achieve this, we need to ensure that competition in asset management works effectively to minimise the cost of investment."To achieve this, we need to ensure that competition in asset management works effectively to minimise the cost of investment.
"We want to see greater transparency so that investors can be clear about what they are paying and the impact charges have on their returns. We want asset managers to ensure investors receive value for money through pursuing energetically their duty to act in their customers' best interests.""We want to see greater transparency so that investors can be clear about what they are paying and the impact charges have on their returns. We want asset managers to ensure investors receive value for money through pursuing energetically their duty to act in their customers' best interests."
He ruled out a price cap, which he argued would not encourage competition.He ruled out a price cap, which he argued would not encourage competition.
What is the asset management sector?What is the asset management sector?
Some investors have been critical of the sector for years, owing to the complicated structure of fees that can include charges for performance. Some investors have been critical of the sector for years, owing to the complicated structure of fees that can include charges for performance and transactions.
There was criticism in the report of "actively-managed funds" when a fund manager is paid to research the market. The extra cost to investors of this service were, on average, "not justified by higher returns", it said.There was criticism in the report of "actively-managed funds" when a fund manager is paid to research the market. The extra cost to investors of this service were, on average, "not justified by higher returns", it said.
The FCA is proposing an all-in fee among other measures to help investors decide which fund is the best for them.The FCA is proposing an all-in fee among other measures to help investors decide which fund is the best for them.
It also wants a more standard set of information across the sector making costs and charges clear.It also wants a more standard set of information across the sector making costs and charges clear.
The potential benefits of UK pension funds pooling their assets to gain better returns should also be explored, the FCA said.The potential benefits of UK pension funds pooling their assets to gain better returns should also be explored, the FCA said.
The Investment Association, the trade body that represents UK investment managers, said that it had already been improving the transparency of costs.The Investment Association, the trade body that represents UK investment managers, said that it had already been improving the transparency of costs.
"The investment management industry is committed to serving the needs of the UK's savers and investors and so we support the FCA's objectives to ensure that competition in the industry works to the benefit of its customers, whether individuals, families or institutions," said Chris Cummings, the association's chief executive."The investment management industry is committed to serving the needs of the UK's savers and investors and so we support the FCA's objectives to ensure that competition in the industry works to the benefit of its customers, whether individuals, families or institutions," said Chris Cummings, the association's chief executive.
"Over the coming weeks, we will engage closely with the FCA to understand its findings and the full implications of potential remedies.""Over the coming weeks, we will engage closely with the FCA to understand its findings and the full implications of potential remedies."
The interim report now goes to consultation. The FCA said action could be announced next summer.The interim report now goes to consultation. The FCA said action could be announced next summer.