Watchdog to act over high fund charges

THE City watchdog plans to crack down on the £5.2 trillion fund management sector for unfairly making customers pay too many of its costs, its chief executive said yesterday.
By The Newsroom
Published 31st Oct 2013, 08:48 BST

Asset managers pay brokers commission to cover trading fees and for research to help work out investment strategies, and are allowed to pass the cost on to their own customers, who also pay an investment fund an annual management fee.

Customers – institutional and retail investors – have long complained about high charges and the funds, already sensing a change in mood among regulators, have been trying to head off intervention by developing industry-based solutions.

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A specific concern is that some asset managers stretch the definition of research and use client commissions to cover non-eligible costs and services, Martin Wheatley, chief executive of the Financial Conduct Authority (FCA), told the watchdog’s annual asset management conference.

Mr Wheatley give two examples of practices he wants to stop – firms allocating significant sums of their Bloomberg and Reuters subscriptions and payments for meetings being passed on to customers.