FCA backs all-in fund fee in scathing final report

They will also be required to appoint a minimum of two independent directors to their boards.”The objective of investment is sustainable wealth creation which delivers absolute returns”.Shares in asset managers fell on the news.”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”, he said.The FCA said it has no problem with a fund selling units at a higher price than it buys them at any given moment, but it thinks the monies should flow back into the fund or, failing that, investors should be aware that the company managing the fund is pocketing the difference.To help improve the effectiveness of intermediaries, the FCA has also announced it will launch a market study into investment platforms. Once transaction costs are included, that outperformance of passive versus active investment soars to nearly 45 percent.Andrew Carter, CEO of Royal London Asset Management, said: “The FCA has chosen a sensible way forward, both in how it will engage with the industry and with its implementation timetable, taking account of upcoming European Union legislation and Brexit”. The FCA has published a consultation paper, focussing on the remedies related to governance and technical changes to promote fairness for investors, .It will also call on the wider investment industry to agree a standardised costs and charges disclosure code, with an independent chair to co-ordinate work with relevant stakeholders.They argued this would make it cheaper for asset managers to switch investors in bulk, but warned transfers should not result in “orphan” clients where investors are receiving ongoing advice.The FCA started looking at the asset management sector in 2015 to better understand how managers compete in the UK’s £7 trillion ($US9 trillion) industry and whether they were adequately motivated to control costs. Far more effective than an increase in regulation, however, is the financial Darwinism already wreaking change on the industry. These changes will only lead to more positive investment outcomes for consumers. These charges can mount up for funds that trade frequently over the year. A survey published this week by State Street Corp. showed the vast majority of industry players expect more downward pressure on fees in coming years.The warning was sounded over the performance of high fee funds in particular, with the report noting that “there is some evidence of a negative relationship between net returns and charges”. 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.As things stand, those who invested directly with the fund group via an adviser still have commission (typically 0.5 per cent) paid to the adviser, even if they are no longer receiving any service. “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”.Alongside Smart Portfolios, IG offers clients a technologically advanced and low-priced investment platform for share dealing. We believe that a low-priced online service should not compromise at all on customer service, resulting in greater consumer control and clarity’.