On the back of our blog yesterday about the state of the fund management group comes some concerning news from the regulator about the asset management industry.
The Financial Conduct Authority (FCA) has been running a review into the industry, publishing an interim report last November and final reports about now.
The findings are concerning as they have concluded that fund manager profits are too high (an average operating margin of 36%) which is likely to mean investor detriment, charges are too complex/opaque (leading to a call for a single charge), fund managers use pricing to generate extra profits (box profits) and that some of the big consultancy firms’ fund ratings are influenced by hospitality and income.
At Altor we have a simple (if naive) view that our clients should be able to understand what they are investing into and what they are paying. If they did perhaps the fund management industry would become more competitive. We offer an ongoing service that aims to simplify performance and cost and report it back to our clients. It looks as though the regulator is about to make this simpler for us.
The regulator doesn’t get everything right but is generally on the side of the client and is not praised enough for the work it does.