FCA publishes new rules for fund managers

The Financial Conduct Authority (FCA) has today published new rules and guidance to improve the quality of the information available to consumers about the funds they invest in.

The regulator reported that its asset management market study revealed evidence of weak price competition in many areas of the asset management industry, resulting in lower returns for savers, pensioners and other investors.

It also detailed that the Department for Work and Pensions will continue to review and, “where possible, remove barriers to pension scheme consolidation”.

Over £1trn is managed for individual investors, while £3trn is managed on behalf of UK pension funds and other institutional investors.

Commenting, Aegon pensions director, Steven Cameron said: “It’s crucial that as an industry, both asset managers and the wider savings and investment industry help individuals understand their investment options.

“That’s whether in a workplace pension considering issues like alternatives to default funds or those moving into retirement considering how to invest during drawdown.

“Setting out fund objectives on financial and non-financial matters in clear and simple language will encourage more customers to engage and to make informed decisions.

“Investing in a fund with the right objectives can be as or more important than charges in getting a good outcome and value for money.”

In April 2018, the FCA introduced new rules to ensure fund managers act as agents of investors in their funds, with today’s rules and guidance designed to complement the work carried out then by helping consumers gain a more comprehensive understanding on how their money is being managed, therefore allowing them to make better investment decisions.

The new rules set out how managers should describe fund objectives and investment policies to make them more useful to investors, while requiring fund managers to explain why and how their funds use particular benchmarks. If benchmarks are not used, the guidance states that fund managers must advise investors on how they assess the performance of a fund.

Furthermore, fund managers must clarify that, where a performance fee is specified in the prospectus, it must be calculated based on the scheme’s performance after the deduction of all other fees.

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