Vanguard
Sean Hagerty, Managing Director, Europe: “This is an important moment for UK investors. We support the FCA’s efforts to lower the cost and complexity of investing. Consumers always benefit from lower prices, better quality products, and clearer information.
“Costs matter. Every pound that investors pay in charges is a pound out of their potential returns, reducing their chances of being able to afford a comfortable retirement or save for a mortgage deposit.
“Our own proprietary research demonstrates the impact of cost on performance. Our findings show that too many funds fail to meet their performance benchmarks, largely because of the charges they levy.
“As an industry, we have an opportunity to reassure people that investing can be a force for good, and for many people, a sensible way of providing for the future.
“This includes ensuring investors have access to all the information they need, including costs, in a format they can understand. The increased transparency proposed by the FCA will enable an informed investor to choose high-quality, low-cost products which will lead to better financial outcomes for UK investors.”
The People’s Trust
Founder Daniel Godfrey: “Investment Managers will be relieved today. The FCA has delivered a report which spares them the harshest potential remedies flagged in their interim report last November.”
“Asset managers’ biggest problem isn’t the FCA. It’s 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.”
Aberdeen Asset Management
Martin Gilbert, chief executive: “I strongly welcome the FCA’s Market Study as it provides clear guidance on how the FCA wishes the industry to operate in the future. Its recommendations to improve investor protections through better governance and to drive competition through greater transparency of fees and fund objectives are constructive and sensible. With investment risk increasingly being passed down from governments and employers to individuals, it is crucial that asset management evolves to meet this new world.
“I have stated several times that I am in favour of all-in fees including all costs as the industry has an obligation to deliver what the customer wants. Incorporating dealing charges for equity funds should be straightforward particularly for those managers, like ourselves, who have low portfolio turnover. It is more challenging to calculate all-in-fees for bond funds, but I’m encouraged the industry is already looking at ways of doing this. We need to embrace the concept and commit to finding a solution for the best interests of clients.
“I am a vocal advocate of the benefits of involving independent directors in fund governance, having seen how they help elsewhere in the world. While supporting FCA’s general moves in this direction, Aberdeen would advocate going further than the FCA currently suggests by introducing two independent directors on to the Boards of UK open-ended fund ranges. This introduces a separate and independent level of oversight from that undertaken by the manager, with an exclusive focus on the interests of fund shareholders as distinct from firms own commercial interests – a point which FCA acknowledges in its consultation paper. This finer point notwithstanding, I certainly agree that strengthening the onus on both investment managers and fund boards to consider value for money for investors will help to protect investors’ interests.
“I firmly believe these remedies will not only benefit customers but ultimately strengthen confidence and competitiveness in the UK asset management industry.
“The industry now needs to engage with the regulator to discuss and coordinate the implementation of the recommendations.”
The Investment Association
Chris Cummings, CEO: “Our industry looks after pensions and investments for millions of UK households, helping them to lead more prosperous lives into retirement. With this role comes significant responsibility. We strongly support the FCA’s objective of ensuring our industry serves its customers in a competitive, accountable and transparent manner.
“Many of the key recommendations work with the grain of European legislation already in the pipeline to introduce more clarity and transparency for consumers. We will work closely with the FCA as it looks further into the detail of how to present costs and charges in the clearest way for savers and how it will develop more independent oversight of investment funds in a way that is effective and proportionate.
“We welcome the regulator’s recognition of the industry’s work to date on developing a consistent and transparent disclosure code for charges and costs which can be built on further with consumer groups. The FCA has listened to our calls to make it easier for savers to switch between share classes, which we welcome.
“Asset managers compete every day to attract clients and investors and are focused on delivering the best outcomes for them. 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.”
IG Group
Ian Peacock, Head of UK and Ireland: “We welcome the FCA’s final report of its Asset Management Market Study and its call for more transparency on fees and benchmarks. These changes will only lead to more positive investment outcomes for consumers. Hidden charges have been materially eating into investment returns for years. Being upfront about charges, allowing investors to see their total cost of ownership, will inevitably lead to fee savings overall, meaning a greater portion of an investor’s returns can be reinvested, generating further earnings.
“Fee transparency in the wealth management industry has come under increased scrutiny in recent years, but, while there has been some downward pressure on fees, the sector has been slow to change. We have long held the view that many wealth management providers fall short when it comes to fee transparency, leaving investors in the dark about the true cost of investing and the impact it will have on their returns. The changes from this review will hopefully mean that investors are finally no longer blindsided by fees.
“In April this year we launched IG Smart Portfolios, a range of risk managed investment portfolios, with the aim of putting true transparency at the heart of direct customer choice. There are no set-up, dealing, rebalancing or exit fees and investors get complete transparency on total costs of the portfolios, with no hidden charges.”
FCA Market Study into Investment Platforms
“We welcome the upcoming market study into investment platforms. IG’s Share Dealing offering has a standard trading charge from just £5 for UK shares, a focus on promoting low-cost ETFs and does not charge investors platform, custody or transfer charges. We believe that a low cost online service should not compromise at all on customer service, resulting in greater consumer control and clarity.
“There are three main areas that IG will call for the Investment Platforms Market Study to focus on:
- Improving the clarity for consumers on the fees charged by Investment Platforms
- Standardised costs
- A clamp down on hidden fees and platforms that do not disclose all their fees
- An examination of the various online comparison services on Investment Platforms and their true independence
- Removing transferring out fees so consumer do not suffer financially if they want to change Investment Platforms just as they would not if they switched energy or mobile phone providers.”
