Asset Management

On June 28 2017 the FCA released its Asset Management Market Study Final Report (MS 15/23) in which it proposed an overall package of remedies to make competition work better, and protect those least able to actively engage with their asset manager.

The study found that on trading and execution costs, "most firms did not have adequate management focus, front office business practices or supporting controls to meet our current requirements on best execution". The study also found that firms can earn significant administration fees on top of the AMC. The package of remedies will increase the transparency of costs so that those seeking information can get it.

The study emphasised the changes due to come into place at the start of 2018 under PRIIPs and MiFID II. "The new provisions under MiFID II go beyond what is currently required and will introduce new requirements for firms to provide aggregated and on-going information on all costs. Firms will, where applicable, need to provide the aggregated information to the client on a regular basis, at least annually, for the lifetime of the investment. Firms must also provide an itemised breakdown of costs when the client requests it. These changes will give consumers greater understanding of the full costs and charges of the investment products and services that they are buying. Both PRIIPs and MiFID II will require firms to calculate and disclose indirect costs such as transaction costs and to present charges as a cash amount in cost disclosure documents. This will allow the client to understand the overall cost as well as the cumulative effect on the return of the investment." To learn more, please see the FCA Asset Management Study website.

The study also highlighted that reforms under MiFID II mean that there will be greater obligations around best execution for asset managers. The new, more comprehensive best execution provisions in MiFID II will also strengthen the content and quality of disclosure to clients. Asset managers will be expected to step up their efforts to obtain the best possible result for their clients when placing orders with brokers on behalf of their clients. They will also be required to provide greater transparency on execution quality including the top five entities to which they sent orders for execution in the preceding year. The FCA noted that there is also an expectation that these requirements will increase firms’ monitoring of their own execution quality.

FCA's Asset Management Market Study Final Report (MS 15/2.3)

FCA publishes final report into asset management sector

Investment Managers still failing to ensure effective oversight of best execution