FSA may probe fund charges

26 Mar 2012 | News - Comment now

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FSA may probe fund charges

The Financial Services Authority (FSA) could be set to look into the fees and charges levelled by UK open-ended fund managers.

Peter Smith, head of investments policy at the FSA, indicated to Bloomberg that the regulator might investigate why fund charges are so high.

‘In what is allegedly a competitive industry, the UK funds market, how is it that the average cost of funds has risen over the years rather than fallen?’ queried Smith.

‘That’s something we’re going to be thinking about.’

The FSA has since claimed that there are no plans for an official investigation into fund charges but that it was an issue that it was looking into.

The level of fees and charges in funds, and the lack of transparency in the cost structure, has come under attack in recent months from asset managers such as Fidelity, and wealth manager SCM Private, which launched a campaign, entitled True and Fair, against hidden fund charges.

Research from the Institute of Financial Studies (IFS) in 2009 indicated that the average UK open-ended fund charged its clients 2.2 per cent annually, compared with just 1.04 per cent in the US.

The Investment Management Association (IMA) has repeatedly denied that there are hidden charges in open-ended funds and also dismissed the IFS report that UK charges were double those in the US.

Gina Miller, co-founder and partner at SCM Private, welcomed the suggestion that the FSA was to look into funds' fee structures.

Miller commented, ‘Countless studies over many years have revealed that UK fund management charges are some of the highest in the world.

‘Furthermore, as long ago as 2000, an FSA commissioned research paper found that in the UK, only half the overall fees and costs were disclosed to investors.

‘SCM Private has found that, 12 years later, UK savers are still paying around £18.5 billion a year in hidden charges,’ she added.

‘We hope this will now follow the recommendations made in 2000 that these hidden costs are finally and properly revealed to consumers.’

Related topics: Fees and charges Financial Services Authority, Investment Managment Association, SCM Private

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