What does the FCA’s Asset Management Market Study mean for you?

The Financial Conduct Agency (FCA) has released the final report of its Asset Management Market Study, and was broadly critical of the wider industry in terms of clarity on fees, benchmarks and underselling of index products. It also announced a market study into Investment Platforms and their influence on the consumer. Here’s our take on the report.

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Ian Peacock, head of UK and Ireland at IG Group, provided a measured view on what this means for IG and its clients. He said: ‘We welcome the FCA’s final report of its Asset Management Market Study and its call for more transparency on fees and benchmarks. These changes will only lead to more positive investment outcomes for consumers. Hidden charges have been materially eating into investment returns for years. Being upfront about charges, allowing investors to see their total cost of ownership, will inevitably lead to fee savings overall, meaning a greater portion of an investor’s returns can be reinvested, generating further earnings.’

Ian added that: 'Fee transparency in the wealth management industry has come under increased scrutiny in recent years, but, while there has been some downward pressure on fees, the sector has been slow to change. 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. The changes from this review will hopefully mean that investors are finally no longer blindsided by fees.’

In partnership with BlackRock, IG has moved into the wealth management industry with a focus on offering a low-cost managed portfolio service to the UK market. All things being equal, lower fees will allow an investor to keep more of what they earn which will grow their wealth at a greater rate over time. Referring to this, Ian said: 'This year, in April, we launched IG Smart Portfolios, a range of risk-managed investment portfolios, with the aim of putting true transparency at the heart of direct customer choice. 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.’

FCA Market Study into investment platforms

Alongside Smart Portfolios, IG offers clients a technologically advanced and low-cost investment platform for share dealing. The FCA announced that they would launch a study to see how competition is working in the wider market. In response to this, Ian said: ‘We welcome the upcoming market study into investment platforms. IG’s Share Dealing offering has a standard trading charge of just £8 for UK shares, a focus on promoting low-cost ETFs and does not charge investors platform, custody or transfer fees.  We believe that a low-cost online service should not compromise at all on customer service, resulting in greater consumer control and clarity.’

There are three main areas that IG will call for the Investment Platforms Market Study to focus on:

  1. Improving the clarity for consumers on the fees charged by Investment Platforms:
    • Standardised costs
    • A clamp down on hidden fees and platforms that do not disclose all their fees
  2. An examination of various online comparison services on investment platforms and their true independence
  3. Removing transferring out fees so consumers do not suffer financially if they want to change investment platforms just as they would not if they switched energy or mobile phone providers

We look forward to engaging with the FCA on this issue, and will continue to be proactive in delivering the best possible outcome for our clients.

To read the FCA report in full, please see here.

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