The Financial Conduct Authority (FCA) has published the final findings of its asset management market study.
It has also announced a package of reforms to address concerns identified in its interim report to the sector.
The interim report was published last year and it found, despite many firms operating in the market, there is evidence of sustained high profits over several years.
The report also found that price competition is weak in several areas and that investors are not always clear what the objectives of funds are.
It found that fund performance is not always reported against the appropriate benchmark, and the FCA found concerns about the way the investment consultant market operates.
The final report confirms these findings.
Andrew Bailey, chief executive at the FCA said: "The asset management sector is important to the economy, managing the savings of millions of people and in the current low interest environment it's vital we help people earn a return on their savings.
"We need a competitive sector, attracting investment into the UK that also works well for the people who rely on it for their financial wellbeing."
The Pensions and Lifetime Savings Association (PLSA) said that pension funds are some of the investment management industry's largest clients.
Graham Vidler, PLSA director of external affairs, said: "We have been calling for greater cost transparency and expressed concerns about cost levels for some time.
"These issues ultimately impact the value of people's retirement savings and we therefore welcome the FCA's commitment to address the serious issues facing the market."
The FCA's proposed reforms fall in to three areas:
• To help provide protection for investors who are not well placed to find better value for money
• To drive competitive pressure on asset managers
• To help improve the effectiveness of intermediaries
The implementation will take place in several stages, some do not require consultation and are now being taken forward.
The FCA has published a consultation paper, focussing on the remedies related to governance and technical changes to promote fairness for investors.
Vidler said: "We strongly welcome the FCA's commitment to working with the DWP to remove barriers to consolidation and pooling.
"Institutional investors, however large and however well-governed, need a competitive, transparent market to deliver the best outcomes for their members."
First published 30.06.2017
Lindsay.sharman@wilmingtonplc.com
