Asset Management: Under the Microscope

The FCA’s Business Plan for 2015/16 Included an intention to undertake a market study into asset management – see Regulatory Roundup 64.

The terms of reference of the study has now been published which contains some interesting statistics

The value of the asset management industry to the UK is reflected in the fact that it is the largest in Europe, at around £6.6 trillion, and second only to the US globally; it is estimated that the industry earned around £15 billion in revenue in 2013 and generated about 1% of UK GDP. Apart from a decline seen between 2013 and 2014, the number of asset managers has grown in recent years and now stands at 1,787 firms, some 10% up on the 2008 figure. As might be expected, institutional investors are the largest client type (nearly 80% compared to just over 19% classified as ‘retail’), albeit that the end-beneficiaries may very well be retail.

As for the market study itself, the paper identifies three main topics to be explored:

  • how asset managers compete to deliver value
  • whether asset managers are willing and able to control costs and quality along the value chain, and
  • the effect of investment consultants and other advisers on competition for institutional investment management.

The FCA invites submissions on the topics raised in the terms of reference by 18 December 2015. The FCA will also host a series of roundtables in order to hear views, with some stakeholders being invited to bilateral meetings.  Aside from asset managers, information may be sought from investment consultants and platforms and their clients as well as trade and consumer bodies.  Chapter 5 spells out the products and services that will be out of scope – such as IFAs and private equity funds – as well as those in scope.

The intention is to publish an interim report in summer 2016 setting out the FCA’s analysis and preliminary conclusions (including possible remedies to address any concerns identified), with a final report in early 2017.

Those keen to gain further understanding on the FCA’s powers to carry out market studies, and how such studies are carried out, should refer to the guidance published in July (FG15/9).

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