The FCA has found a number of asset management firms are being unclear on costs following a review into fund charging.
The financial watchdog complained there were 'still examples of firms referring to different charge figures across multiple documents, making effective comparisons difficult,' in the 11 firms it used as a sample.
It found cases where businesses had not provided investors with a clear, combined figure for charges in their marketing material or on websites, and examples of poor descriptions of administration charges which 'did not accurately reflect the operation of the charge'.
The review concluded that seven of the 11 firms used the AMC as the headline charge figure on marketing material, which 'did not provide investors with a clear, combined figure for charges,' and also seven firms which did not 'fully consider' investors and had charging structures and information that were 'likely to be less than clear'.
Furthermore, six firms made charging structures more complex by using administration charges that did not correspond to specific administration costs or adding performance fees, and three firms had unclear descriptions of administration charges.
The firms selected for the review make up 29% of the industry, with approximately £131 billion assets under management.
FCA director of supervision, Clive Adamson (pictured), said that on the whole asset managers were exhibiting good practice, but that clarity in fund charging was a big issue.
'We have found examples of good practice being exhibited by firms in providing clear and consistent description of fund charges across different marketing documents,' he said.
'We believe that it is important for investors to clearly understand and compare charges across the market as this, together with fund performance and risk profile, are the key areas that they should look at.'
Investment Management Association (IMA) chairman Daniel Godfrey responded positively to the FCA's demands and called on fund groups to abandon the annual management charge (AMC) in favour of the ongoing charges figure (OCF).
'The OCF provides a common standard for all the known costs and charges that a fund will bear in a single comprehensive ratio that is easy to understand and to compare. This is in stark contrast to the AMC because a range of other costs can be borne by the fund, making the AMC a poor reflection of the total cost at worst, and a poor basis for comparison at best,' he said.
'The IMA calls on all market participants, fund managers, platforms, IFAs, data providers and the media to respond by abandoning all use of AMCs and by the exclusive use of the OCF in marketing literature, advice and commentary.'
Invesco Perpetual has been one the early mover towards OCF.
On 1 April the firm introduced a new single fund management fee (FMF) across its entire fund range, equivalent to the OCF.
'Invesco Perpetual is introducing the fund management fee to make it easier for investors to understand the costs of the funds in which they invest,' head of UK retail Ian Trevers said at the time.