The retail asset management industry has largely welcomed the Financial Conduct Authority (FCA)'s bids to improve transparency and value for money within asset management in its Final Report of the market study, but there are concerns surrounding some of the governance "remedies" and how long additional consultations will take.
Cultural change
Founder of The People's Trust Daniel Godfrey said investment managers would be "relieved" by the FCA's report.
"The FCA has delivered a report which spares them the harshest potential remedies flagged in their interim report last November.
"Asset managers' biggest problem is not the FCA. It is the dysfunctional nature of the investment chain that prevents them fulfilling their potential to optimise returns for investors and drive economic growth."
"The purpose of investment is sustainable wealth creation which delivers absolute returns. Yet the critical success factor in the industry is short-term relative returns.
"The effect of this disconnect damages returns in the long-term by depriving the non-financial economy of long-term investment and stewardship for positive impact. Even the biggest asset managers do not have agency to reform the chain without a mandate from clients.
"A way needs to be found to break the links of this dysfunctional chain so that investment can focus on sustainable wealth creation, not short term, relative performance.
"Today's report makes it clear that only external disruption can deliver the necessary change, not the FCA."
Ryan Hughes, head of fund selection at AJ Bell, is also sceptical of whether the FCA's proposals and reforms will be sufficient in making necessary industry change.
"The key now is in the implementation," he said."An awful lot of what has been announced today by the FCA is still up for further consultation, so there is going to be little immediate change.
"It should also be remembered that the unbundling of fund charges since the Retail Distribution Review has had virtually no downward impact on active fund charges as it was expected to do.
"So, whilst today's paper is encouraging, the key now is how long the additional consultations take and how quickly the proposed reforms are enforced."
CEO of the Investment Association Chris Cummings said the trade body would "work closely with the FCA as it looks further into the detail of how to present costs and charges in the clearest way… and how it will develop more independent oversight of investment funds in a way that is effective and proportionate."
"The FCA has listened to our calls to make it easier for savers to switch between share classes, which we welcome.
"Our priority now is to have a meaningful dialogue with the regulator about the implementation of the recommendations, to ensure savers are getting the best possible deal.
"A pragmatic timetable is key to achieving this, given the major regulatory changes already in the pipeline and the preparations for Brexit."
Odi Lahav, CEO of Allenbridge, MJ Hudson's consultancy arm agreed that the report must be view in the context of incoming regulations and the UK's departure from the EU.
"It is… important to note today's context and current economic climate in implementing these requirements, particularly in light of Brexit and the coming implementation of a multitude of new regulations."
Lora Froud, investment management partner at Macfarlanes law firm, said asset managers should be pleased the FAC is not referring to the CMA.
"Asset managers will be breathing a sigh of relief as the final report was anticlimactic. They will be delighted that they are not being referred to the CMA for another two years of uncertainty.
"Most of the regulatory changes proposed are open for consultation and there will be room for further lobbying to try to ensure the proposed packages are balanced.
"The most concerning parts of the study were likely to be governance changes and all in fee proposals. Neither represent any significant departure from what is coming down the line under PRIIPs, MiFID II and SMCR."
