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Fund charges face major reform as FCA uncovers ‘inherent flaws’
by Dylan Lobo on Oct 30, 2013 at 09:54
Fund groups face tough new rules over charges after the Financial Conduct Authority (FCA) said it had found 'inherent' conflict in current practices.
In a speech later today Wheatley will call for greater transparency to boost the reputation of the funds sector, with particular concern over where dealing commission is spent and how fund firms are 'pushing' the definition of research.
The regulator intends to consult asset managers to determine what changes need to be made to the existing regulation, which has been in place since 2006.
Wheatley will say: 'This is a critical period for the industry; a crossroads. So today we ask some challenging questions. Are we internationally competitive? Are charges and fees transparent? Are there inherent conflicts within the system? Today we start a debate.'
'We need to be confident that managers are putting their clients’ value for money, good returns, and transparency at the heart of how they do business. Then the discussion is about how best to get there – is evolution enough or do we collectively need to be more revolutionary?'
Current rules allow fund managers to use dealing commission to cover the cost of third party research and there are growing demands for fund firms to absorb these costs themselves.
Research published by Frost Consulting earlier this week estimated that fund managers could face a £3 billion hit from the regulator’s clampdown on the industry's use of sell-side research.
Wheatley will say the FCA will seek to tackle the problem by:
- work with asset managers in the UK and policy makers in Europe to find a balanced regulatory solution;
- launch a consultation paper next month to clarify rules on research, including guidance around corporate access; and
- launch a thematic review that follows up on the FCA’s earlier work looking at conflicts of interest within asset management.
Investment Management Association (IMA) chief executive Daniel Godfrey said in a statement: 'The IMA has been conducting a significant review of this market for some months and we expect to be able to report our conclusions early in the New Year.
'Our clear objective is to ensure we deliver the greatest possible value for money, transparency and accountability to our customers and we will explore all possible avenues to make sure we do just that.'
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by James Phillipps on Dec 09, 2013 at 07:52