The FCA is, rightly, taking a strong stance against consumer detriment from the asset management community. For too long investors have been unsure what fees they are paying and the impact this subsequently has on performance. Contributor Hector McNeil, Co-EO – HANetf .
“It is important that asset managers genuinely compete for inflows and the pricing must reflect this, rather than simply how much a client is willing to pay. This is a trend we have seen over the last couple of years and one we can only see remaining as the regulators around the world take a keen interest in the subject.
“Europe is lagging way behind the US, with around just 10% of assets in passive investments, compared to 40% in the US. This is a clear indicator that products are being mis-represented in Europe and the benefits haven’t passed to the end investor. RDR helped but hasn’t had the definitive push we need. Higher fees are the main drag on long term wealth growth and the FCA should step in and look at the US for the right model to move forward to.
“Increasingly most investors have some sort of passive exposure in their portfolios, including ETFs, and by having a benchmark of underperforming funds it will enable investors to gain a better understanding of how their portfolios are performing and lead to better client outcomes.
“The rise of passive investing has certainly helped improve the investor experience tremendously, with this being just one example. In time we are confident that with a strong regulatory stance active managers will adopt the ETF wrapper in future to help bring fees down as costs, transparency and liquidity stay at the forefront of investor’s and regulators minds.”