In the words of one of our colleagues here at the Embark Group :

“Another regulatory paper and another round of speculation, comment and observation abounds in the media. It’s all too easy to become caught up in the feeding frenzy – should one discuss and criticise, review and reflect, pontificate, or simply ignore and carry on…”

At DISCUS we thought it would be helpful to highlight the main points we picked up in the media in the immediate aftermath of the FCA paper’s release. We also asked a couple of our discretionary manager (DFM) partners to share their initial thoughts on the findings and the implications it may have on their business models and the market in general.


Key findings of the final report into the Asset Management Market Study (you can find out more on the FCA website

»  Examples of poor value for money were identified in both active and passive strategies

»  Charges for active management have remained broadly the same for the past 10 years

»  Price competition is weak for actively managed products

»  Investor awareness and focus on charges is mixed, although generally poor

»  The proposal is for the disclosure of an ‘all in’ fee for the asset management charge which includes an estimate of transaction charges. It is important to ensure that this is implemented on a consistent basis

»  A working group is to be set up to look at how to make fund objectives more useful and to consult on how benchmarks are used and performance is reported

»  A separate consultation paper indicated that the FCA wants to make it easier for fund managers to switch investors into cheaper share classes and seek views on the introduction of a phased-in sunset clause for trail commissions (this particular point gained a lot of column inches over the course of the week)

»  Market study to be undertaken into investment platforms and how competition is working

»  There was a recommendation for HM Treasury to consider bringing investment consultants into the FCE regulatory perimeter

»  Vertical integration raises questions about competition (we are expecting to see more on this) 


Initial views from our discretionary manager (DFM) partners

Douglas Branson, Head of UK Distribution at GAM said:


The over-arching motivation for the FCA to launch this ground-breaking report is that the UK’s £7 trillion asset management sector is integral to the health of the economy and that it is vital, in a low-interest environment, that people get all the help they need to earn a return on their savings. We believe that the vast majority of asset management professionals are aware of the weight of responsibility on their shoulders and are highly motivated to achieve the best, risk-adjusted returns on behalf of their investors. This is certainly the case at GAM where we are fully committed to advancing the potential of client capital. Consequently, we welcome and embrace the new reforms in relation to delivering value for money, providing an intuitive charging structure and measures aimed at improving transparency. As an industry leader, benefiting from economies of scale in both fund management and distribution, we are well placed to remain prudent stewards of our investors’ assets as the regulatory environment continues to evolve.



Seven Investment Management (7IM) responded on several aspects of the findings, given the diverse nature of their business model. On the FCA’s announcement that it is launching a market study into platforms, Verona Smith, Head of Platform (who we feature in this weeks’ Spotlight On video), said:


“Platform assets have more than doubled over the last 5 years and are now mainstream, so the time is right for a market study. We hope to see a focus on service and end customer engagement. Platform administration is one of those areas that when working, no one notices; but the moment it doesn’t the effects are huge: it has to be done well.”




It’s time for ‘common sense benchmarking’

We often write about benchmarking and Vertem Asset Management have quite strong views on this. Tom Sheridan, Chief Executive of 7IM said:


“This announcement, whilst business as usual for us, is hugely welcome. It’s time for ‘common sense benchmarking’ using measures that the end customer can actually relate to. Traditional index comparisons have their place, but how much do they mean to investors? Not a great deal in our view. It’s time for less smoke and mirrors, and more common sense: finding the right measure for investors, rather than choosing a benchmark that suits the manager, is a good place to start.”


The ‘all in’ charge

Our DFM partners welcomed the all in charge, given it should help client’s to understand exactly what it is they are (will be) paying. They all appeared to agree that the implementation of a consistent approach across the market will be a somewhat mammoth task.

Tom Sheridan, Chief Executive, 7IM said:


“The concept of an all in fee is common sense and can only be good news for investors. The challenge is to ensure that asset managers report this fee in a consistent, comparable way and that there are no unintended consequences along the way.”



It is resoundingly clear that everyone we spoke to welcomes the changes outlined in the FCA paper, given the ultimate beneficiary will be the end investor.

This article was created for the DISCUS website based on a review of the FCA’s Asset Management Market study. To find out more about the DISCUS discretionary manager partners click here ›