FCA asset management market study report: PwC comments

Published at 10:18 AM on 28 June 2017

Commenting on the Financial Conduct Authority's Asset Management Market Study final report,
Mark Pugh, PwC's Asset and Wealth Management Leader, said:
"We welcome today's final report from the FCA, although there is clearly much detail to digest in the remedies and consultation.
"The industry supports many of the FCA's aspirations.  We are pleased to see acknowledgement of the ongoing 'business as usual' regulatory agenda including MiFID 2 and PRIIPS.  The FCA is right to work within the confines of these rules, and we look forward to supporting further debate on issues such as transparency.
"It is also refreshing to see the regulator so keen to work with the industry to develop solutions, rather than solely relying on regulatory rules.  This approach often delivers more effective solutions and is welcome."
Amanda Rowland, PwC partner, added:
"The FCA's use of the Senior Managers Regime (SMR) to ensure accountability in funds is a welcome move combining current initiatives rather than introducing something new and potentially overlapping. We remained unconvinced about the introduction of a wider fiduciary duty, and now look forward to engaging on the forthcoming consultation around the extension of the SMR.  
"The role of iNEDs has been of interest throughout the market study.  While we have examples of this working well, it does not, in my experience, guarantee good governance in and of itself. There are risks that the cost of iNEDs is simply driven up without equivalent benefit to the end customer. The estimate of 480 new iNEDs over a 12-month period will be an expensive challenge for the industry. There is also a risk that the requirement could disproportionately impact the smaller players in the market. 
"The retention of risk-free box profits has been a thorn in the regulator's side for some time. As the FCA acknowledges, the approach of firms to risk free box-profits has been diverse, with the FCA's own rules not being entirely clear.  We welcome the clarity of policy intent from the regulator and believe in this case that a rule change rather than statements of expectation will give the required certainty for the industry.
"The FCA's pragmatic approach to issues such as a single or all-in fee is good news for firms.  Changes required by EU regulation are already in flight and I'm sure that the industry can help develop solutions with the FCA to ensure the best outcomes for customers around clarity of charges.
"The annual assessment of value by a fund is a novel idea.  Often these exercises can prove time-consuming, and thus expensive, for firms - and consequently their customers.  It is important that this new initiative, particularly set against the context of the SMR is a workable solution that delivers insight and consistency across firms."


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