THE FINANCIAL Conduct Authority’s long-awaited report into how the interests of investors can be better served by the fund management industry has met with a mixed response.

Having consulted with representatives of the industry as well as investors, the financial regulator said it had found that competition in the sector is weak, that fund management houses have made “sustained, high profits over a number of years”, and that investors are not given clear information on fund objectives or benchmarks.

As a result, the FCA has come up with what its chief executive Andrew Bailey called a “comprehensive package of reforms that will make competition work better and help both retail and institutional investors to make their money work well for them”.

These reforms include recommending that fund managers are more transparent about their charging structures by publishing single, all-in fees and that they strengthen investor protections by appointing at least two independent directors to their boards. The regulator will also set up a working group to look at fund objectives and benchmarking.

Aberdeen Asset Management chief executive Martin Gilbert welcomed the report, saying it provides “clear guidance on how the FCA wishes the industry to operate in the future”.

“I have stated several times that I am in favour of all-in fees including all costs as the industry has an obligation to deliver what the customer wants,” Mr Gilbert said.

“I am a vocal advocate of the benefits of involving independent directors in fund governance, having seen how they help elsewhere in the world.”

Tom McPhail, head of policy at advisory business Hargreaves Lansdowne, had a similar take, saying its recommendations are “challenging the industry without dismantling it”.

“The FCA’s proposed remedies around fund manager governance, price disclosure and on benchmarking and objectives all appear to strike a sensible balance between disruption and stability, and are clearly taking account of investors’ long-term best interests,” Mr McPhail said.

However, The People’s Trust founder Daniel Godfrey disagreed, saying that the FCA “has delivered a report which spares [investment managers] the harshest potential remedies flagged in their interim report last November”.

That highly critical report, which found that retail investors were faced with poor value for money and weak competition from providers, suggested that the regulator was considering forcing fund managers to provide more clarity on fees and performance objectives.

Mr Godfrey, who was previously chief executive of the Investment Association but left in 2015 after falling out with the industry over what he saw as asset managers’ unwillingness to be transparent on fees, said that investment managers would be “relieved” by the FCA’s actual recommendations.

Justin Modray, director at advisory business Candid Financial Advice, agreed, saying that the regulator’s final report is a “damp squib”.

“Last year’s interim report was one of the FCA’s finest pieces of work, clearly detailing the ways in which the fund management industry is failing its customers,” he said.

“Unfortunately, extensive lobbying by fund managers since then appears to have worked, because the FCA’s proposed remedies in [its final] report are a damp squib and unlikely to make a tangible difference to most investors.

“We remain concerned that the FCA’s proposals will not fix three key issues hurting fund investors: price collusion, failing to pass on economies of scale and profiting from inflated admin expense claims.” The FCA plans to implement its recommendations in stages with some areas, such as how to make fund objectives more useful, being put out to a working group for further input. The regulator also plans to undertake further consultation on how benchmarks should work.