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FCA tells asset managers to assess value in investors' interests
Fund managers will be required to assess how much value they create for investors each year under rules set out by the Financial Conduct Authority.
The FCA said fund managers would have to appoint a minimum of two independent directors to their board to give customers better representation. Board chairs will have personal responsibility to act in the best interests of investors.
Asset managers will also be required to move investors to cheaper share classes when it is in their interests.
The measures are the regulator's response to its review of the £8.1trn asset management industry, which found weak competition, high fees and opaque communication. The FCA's critics have said it should have been tougher with the industry.
Christopher Woolard, the FCA's director of strategy and competition, said: "The investment choices open to people, and the decisions they make on how to invest, can have a profound impact on their financial health. But our market study found evidence of weak price competition in a number of areas. Today's announcements are an important part of a package of measures that, combined, aim to achieve a fair, transparent, open and accountable market."
The FCA launched a consultation on measures to make it easier for investors to choose a fund, including setting out fund objectives more clearly and making it more obvious when funds are constrained by a benchmark. The proposals are meant to stop fund managers charging fees for active management while effectively tracking an index.
Kevin Doran, chief investment officer at online investment platform AJ Bell, said: "The asset management industry is ripe for change. Investors need better choices, better value and better communication from fund managers. For far too long, many fund providers seem to have forgotten just whose money it is they manage, hiding behind vague objectives and excessive charges."
Firms will have 18 months to implement rules on assessing value and appointing directors.