Investment Industry to Adopt Single Charge

Morningstar's Christopher Traulsen explains why the recommendations in the FCA's asset management market study are good news for investors

Christopher J. Traulsen, CFA 28 June, 2017 | 3:56PM
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Christopher Traulsen: So, the FCA today issued its final report on the asset management industry. This follows its interim report that was issued in late 2016 in which they identified several issues related to potential lack of competition, specifically price competition with the asset management industry, questions about governance, et cetera. This report sets out their response, albeit not quite in final form despite the title they are saying they support this or that and it will consult on this or that. But nevertheless, we think it's moving strongly in the right direction.

First and foremost, they are supporting an all-in fee for asset management services. So, the idea is, when you pay for a fund, you've got not just the series of fees but you get one all-in fee that also includes the transaction costs, which have not been included before. This is in keeping with MiFID II and PRIP. So, we think that's very good for investors.

The second thing they are doing is look at improving fund governance by requiring for the first time at least two independent directors or 25% of the board to be independent and we think that will help really shore up the effort to look after investor interest in the fund.

And finally, they are creating a way for fund companies to move investors that are in legacy full freight charge classes into the RDR clean classes or cheaper classes under certain conditions and that should help investors get better outcomes with lower costs.

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Christopher J. Traulsen, CFA  is director of fund research, Europe and Asia, Morningstar.

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