FCA asset management challenge ‘way bigger’ than RDR

Added 14th March 2017

The FCA’s Asset Management Market Survey is akin to a “hangover” for fund groups who will “have to bear the sharp end” of the pressures on fees, according to Nucleus CEO David Ferguson.

FCA asset management challenge ‘way bigger’ than RDR

Launched in November, early reactions to the regulator’s interim report have called for ‘health warnings’ over fees, simpler communications and enhanced governance of fund manager boards.

Ferguson believes the review is “way bigger” than the Retail Distribution Review, with its wholesale changes introduced at the end of 2012.

“We’ve been asking why asset allocation is the primary driver of returns, but fund management costs are many times more, or why not one single multi-asset fund has outperformed its equivalent Vanguard Life Strategies over multiple timeframes,” he said.  

“In 2014 we said the asset management sector was oversupplied, overpriced, underperforming and under attack from all sides.

“We said the regulatory examination of fee transparency and commercial pressure from index funds would help drive a collapse in fees pretty much all across the board. The great big 30-year party was over and the hangover kicks in.

“With the publication of MS15/2.2, this got pretty real.”

Ferguson said neither advisers, nor their clients, gain advantage from their supposedly advantageous collective buying power, while retail funds also cost about four times as much as the institutional equivalent.

He also noted that there is a huge spread between the intellectual property, or talent, of fund management and its cost, while he stressed Nucleus clients are overpaying by as much as £100m every year across the Nucleus wrap alone.

 

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Gary Shepherd

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Gary joined Last Word Media in 2009, becoming editor of Portfolio Adviser a year later. Previously, he worked at Incisive Media with roles across its Professional Adviser, Investment Week, Bloomberg Money and Mortgage Solutions titles. Gary has been shortlisted for various awards, winning Headline Money Investment Writer of the Year in 2010.

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