The UK Financial Conduct Authority has today published the final findings of its asset management market study, following on from an interim report last November. The full report can be read here.

#infographic: Asset Management Market Study – our package of remedies https://t.co/4NXklyP4TZ pic.twitter.com/YTSz0zoZ9o

— FCA (@TheFCA) June 28, 2017

The final report supported the findings of the interim report: price competition is weak as average profit margins of 36% have been sustained over a number of years despite a large number of asset managers in the market. The FCA also found that investors are not always clear on the the objectives of a fund and performance is not always reported against an appropriate benchmark. To improve performance the FCA said it will support the disclosure of a single, all-in-fee to investors. In addition the FCA said there are concerns about the way the investment consultant market operates.

@cfauk welcome @TheFCA report as will help protect consumers’ interests, drive competition and addresses root causes of issues sector faces

— Will Goodhart (@WillGoodhart) June 28, 2017

CFA UK said in a statement “there’s a lot to like” in the report which was a sensible and positive outcome to an important exercise. The association for front office investment professionals continued that it makes sense to work with the fee disclosure requirements in existing regulations such as MiFID II and PRIIPs which give investors more transparency of likely total costs.

“It’s a shame that the focus is on the all-in fee,” added the CFA. “Governance is the real story and here the FCA has got it absolutely right. There’s been too little independent oversight of the way in which investment vehicles are managed. Strengthening the governance requirements – dealing with the root cause rather than with the symptoms – will improve client outcomes.”

The biggest point is that the FCA has stuck by its guns on introducing the all encompassing fee that includes transaction costs

— Sean M Tuffy (@SMTuffy) June 28, 2017

Sean Tuffy, head of regulatory intelligence at Brown Brothers Harriman in Dublin, continued that the FCA’s all-in-fee proposal goes far beyond what the European Union requires and will be interesting to see how this plays in context of the UK leaving the trading bloc.

FCA publish asset management study final report with all recommendations. Not an ice bath – just a tepid one. https://t.co/iQJrdGGYu5

— Richard Butcher (@RButcherptl) June 28, 2017

However, PTL, an independent trustee and governance services provider, was disappointed that many of the FCA’s hard-hitting proposals have been dropped.

Richard Butcher, managing director at PTL, said in a statement: “The all-in fee requirement for asset managers being dropped in favour of simply ‘encouraging’ single price reporting is a definite mistake. This requirement would have created a much needed interest for asset managers to control costs and would have gone a long way to shifting pricing. Elsewhere, there is a recommendation to the treasury that institutionally recommended advice should be regulated, but we are left wondering why a decision is yet to be made on whether or not consultations will be referred to the Competition and Markets Authority.”

Speaking @ProfPensions conference about transparency and the @TheFCA Market Study Final Report, great work by the FCA pic.twitter.com/w8nyJyEQjJ

— Andy Agathangelou (@TransparencyTF) June 28, 2017

Andy Agathangelou, founder of the Transparency Task Force, said in a statement that the FCA’s ‘medicine’ is exactly what the sector needs.

“Some market participants will need to conduct a strategic overhaul of their business models to flourish into the future, and some of those won’t have the appetite or ability to do that,” he added. “At least now the ‘invisible hand’ of market forces will be able to work its magic because the protective layer of obfuscation and opportunistic opacity is being dismantled by a regulator that isn’t scared to regulate.”

• Amanda Rowland, partner at PwC

Rowland said in a statement that the FCA’s use of the Senior Managers Regime to  ensure accountability in funds is a welcome move combining current initiatives rather than introducing something new and potentially overlapping.

“We remained unconvinced about the introduction of a wider fiduciary duty, and now look forward to engaging on the forthcoming consultation around the extension of the Senior Managers Regime,” she added.

Rowland continued that the regulators’s pragmatic approach to issues such as a single or all-in fee is good news for firms. “Changes required by EU regulation are already in flight and I’m sure that the industry can help develop solutions with the FCA to ensure the best outcomes for customers around clarity of charges,” she said.

• David Morrey, partner and head of investment management at Grant Thornton

Morrey said in a statement that the final report has few surprises. “If you didn’t like the interim report, you won’t like the final report,” he added. However, he continued that there are two notable shifts in the tone of the final report in its final form.

“It has backed away from the frontal assault it began on whether actively managed (and generally more expensive) funds could ever be a better choice than cheaper passive (index tracking) funds,” added Morrey. “It has also backed away from considering whether managers should have an additional duty to spell out to investors when they are in serially underperforming funds.”

IA response to @TheFCA (1/4) pic.twitter.com/i9o6a6St3n

— InvAssoc (@InvAssoc) June 28, 2017

Chris Cummings, chief executive of the Investment Association, which represents UK investment managers, said in a statement that many of the FCA’s key recommendations work with the grain of pending European legislation.

“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,” he added.