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FCA writes to 11 groups as it launches fund charge probe
by Danielle Levy on Aug 15, 2013 at 13:57
The Financial Conduct Authority (FCA) is to launch a thematic review into fund charges, Wealth Manager can reveal.
The regulator has concerns that fund charges have become too complex for underlying end-consumers to understand, with Ucits funds and Non-Ucits Retail Schemes (Nurs) set to come under review. The FCA will look at what the charges are; how they are broken down and overseen; alongside the information that is provided to end-investors.
A spokesperson at the FCA confirmed the review would start shortly, with letters going out to 11 asset management companies this week. They will range from global asset managers to boutiques. The financial watchdog is planning to wrap up the review by the end of the year.
'We are doing it [the review] to enable people to make comparisons between one firm and another in terms of what the charges are covering and what they are getting from it,' the spokesperson explained.
The FCA is also engaging with trade body, the Investment Management Association (IMA), on the topic.
The IMA has been very vocal on the issue and is in the throes of developing an industry methodology for an all-inclusive cost per underlying fund unit, which it plans to have in place by the end of this year. The FCA spokesperson noted that the regulator's work was likely to be wider in its scope than the IMA's.
Daniel Godfrey, chief executive of the IMA, said: 'The IMA and its members are pleased that the FCA is seeking to ensure it has a comprehensive understanding of the way fund managers operate, both to align with investors’ interests, and to ensure they meet both the spirit and the letter of extensive regulations on fund charges and disclosure. In the meantime, the industry has proposed new, simple, comprehensive disclosure that goes well beyond that required by regulation, because we believe that it is clearly in consumers’ interests that they are well informed both about the costs and the performance of their investments.'
The move is understood to have followed FCA visits to a number of fund management businesses, in which representatives asked for concrete answers on distribution and pricing strategy, alongside how firms are approaching sub-scale or cost-intensive funds.
Product ranges, and client documentation or communication with retail investors is also understood to have come under scrutiny during these visits.
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