At the beginning of the year, the FCA reported that, of the 145 money managers in the UK, almost half failed to disclose their costs associated with individual funds in compliance with the FCA’s criteria.

According to the FCA in their early July announcement, firms are still failing to assess whether their fund fees are justified by the value they give to investors.

The FCA also points to the fact that some fund managers did not meet reporting standards. The major issue here lay in incomplete assessments, lack of performance details, costs and share classes, as well as a general misunderstanding of relevant fund rules.

This report began following the FCA’s wide-reaching market study in 2017 and concluded that UK investors could and should receive better value for their money. Since then, the FCA has been urging money management firms to disclose the following to their investors:

  • Whether the fund performance was in line with benchmarks
  • The fund’s investment objectives
  • An assessment of the quality of the management service

In addition, the FCA required money managers to charge fair fees that are comparable to market rates and reduce 3rd party costs where possible.

The CFA recommended that reports to investors are published on fund’s websites along with other documents such as fact sheets. In its investigations, carried out in the course of 2019 and 2020, the CFA could locate only 75% of relevant documentation. It was thus concluded that 24% of funds did not clearly present their investment objectives, and only 20% used customer surveys or external firms to measure the quality of their services.

Disturbingly, 58% showed that 2/3 of firms did not specify whether their funds outperformed or underperformed. 62% of the reports did not mention the risk for investors and a whopping 87% did not say anything about fund liquidity.

After this new assessment, from July 2020 to May 2021, the FCA ‘s directive is for non -compliant asset managers to address their shortcomings and implement the new rules within the next 12-18 months.  

If your firm is having challenges following those standards, it is time to take on a different approach.

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