Carol Thomas, Retail Markets Specialist

Transcription

1 November 2018 FCA Investment Platform Market Study Interim Report Views from the Asset Management Industry Carol Thomas, Retail Markets Specialist November

2 Intermediaries Demand Supply KEY MILESTONES CP 17/18 PS18/8 + FG18/3 Rules on box profits Value report and ineds SM&CR Fund Objectives Working Group CP18/9 + IA work Report on IA work Performance Disclosure & Benchmarks Consumer Research CP18/9 Publication of findings Institutional Disclosure Working Group Summary report New group / Release of template Platform Market Study CMA Investigation Interim Report Provisional Decision Report Final Report (Q1 2019) Statutory Deadline April June July Autumn 31 March April Sept 2019 Dec 2019 November

3 NARROW SCOPE DISTRIBUTION LANDSCAPE IPMS Terms of Reference July 2017 (MS17/1.1) Acknowledged platforms are part of wider distribution landscape which includes wealth managers, insurance firms, banks, asset managers with direct route to market Analysis would take this wider landscape in to account and cover both platforms and other firms that offer access to retail investment products It would analyse difference in cost of investment through alternative distribution channels IPMS Interim Report July 2018 (MS17/1.2) Scoped narrowed to just investment platforms in the traditional sense - three points to make: Investors access funds in multiple ways Isolating platforms limits competition analysis Market has moved beyond traditional investment-platform-advice split November

4 DIRECT 2 CONSUMER AND ADVISER PLATFORMS Within narrowed scope, focus on two main platform types: Direct 2 consumer and adviser platforms However, report generally refers to a single platform market and a single group of customers who may be advised or non-advised This results in an integrated set of conclusions about market dynamics and customer choices, which differ between both platform types Two key consequences: Nature of commercial and general relationship between adviser platforms and fund managers is different to the relationship between D2C platforms and fund managers Presentation of information on adviser platforms, particularly of fees and costs, don t have the same impact on customer decision making as that of D2C platforms Holistic analysis requires analysis of total cost of ownership November

5 FUND DISCOUNT AGREEMENTS FCA looked at how platforms use their bargaining power to negotiate down fund charges FCA concern in particular on the following arrangements: IA view Contractual clauses where fund prices can be no higher on comparable platforms Offering benefits to asset managers in return for funds not more expensive Expectations that discounts would be exclusive in return for marketing new funds Fund discounting depends significantly on the nature of the platform, particularly whether adviser platforms primarily provide technical services to facilitate adviser services Not aware of a systematic problem across the market MFN clauses not prevalent in the market Practical challenges to offering discounts across multiple platforms post RDR: Creating new share class for each platform not ideal platforms can t accommodate Where fund discounting arrangements exists, some platforms rename share class under own brand, thus inhibiting comparison across platforms November

6 DISCLOSURE AS A RECURRING THEME MiFID II and PRIIPs cost disclosure Links with other AMMS outputs Interim Report emphasizes disclosure in a number of areas Inconsistent language across platforms when describing platform fees Model portfolio risk labelling Lack of price transparency observed on the platforms and a high level of price complexity November

7 DISCLOSURE WORK RESULTING FROM AMMS 2017 Asset Management Market Study (AMMS) Investors could benefit from greater clarity as well as being better able to compare objectives between similar funds FCA Funds Objectives Working Group CP18/9 FCA set up FOWG tasked with proposing measures on how to improve usefulness of fund objectives for investors and how to facilitate comparability of funds on the basis of their stated objectives which resulted in CP18/9 on clarity of fund objectives and use of benchmarks in fund documentation IA Guidelines It was also agreed through the FOWG the IA would work with members and consumer representatives, informed by consumer research, to promote the use of consistent terminology in communications from fund managers about their funds November 2018 Industry Guidance on Language 7

8 INVESTOR COMMUNICATIONS WORK Developing concrete proposals for clearer industry language when describing: fund objectives, policy and strategy; and communication of risk, use of benchmarks and broader investment terminology Group has been meeting for since Autumn 2017, bringing together wide range of expertise Aims to complement FCA remedies in CP18/9, with pro-active industry approach Wisdom Council Consumer Research Aimed to garner customer-led insight into how to communicate effectively with retail investors Testing complete (qualitative and qualitative) based on focus groups, roundtables and online questionnaires with a cross section of investors with varying levels of financial understanding Key learning points will help build the framework for the IA guidance November

9 SOME FINDINGS FROM CONSUMER TESTING Investors want transparency and the rationale around any chosen benchmark Investors want open and timely explanations of performance, particularly when funds are underperforming Consumers prefer precise rather than vague terms, for e.g. acceptably low or predominantly are meaningless without qualification Some concepts, even with explanation, consumers struggled to unpick, notably passive and derivatives Confusion around exact meaning of return, income, yield and growth Limited interest in understanding benchmarks used solely for risk management definite interest in understanding how managers are being measured internally Weak correlation between investment value of investment assets an understanding in the advised space a bit more correlation in the DIY, execution only space Wide variation in terms of investor understanding of term length November

10 IA GUIDANCE NEXT STEPS IA member Consultation December 2018 Final IA Guidance Publish early Feb 2019 alongside final FCA guidance Possible future work In 2019 possibly test further areas of fund information Oversight by the IA Investor Communications Working Group Financial Services Consumer Panel are members of the Group and FCA participate as observers November 2018 IA Advisory Council 10

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