The National Association of Pension Funds (NAPF) yesterday welcomed the conclusions of the Financial Conduct Authority’s (FCA) wholesale sector competition review 2014-2015.
Of particular note is the FCA’s announcement that it will consider initiating a market review of the asset management (and related services) sector later this year alongside its market review of the investment and corporate banking sectors which is due to start this Spring. Will Pomroy, Policy Lead Corporate Governance, NAPF, said: “The NAPF previously raised questions about the potential competition issues in the investment banking sector, particularly those that arise from cross-selling and the potential cross-subsidy of services. There is a sense that the opacity associated with the current system hinders effective competition and accountability to clients, resulting in reduced oversight and potentially higher costs for end investors.”
In its original submission to the FCA the NAPF raised concerns about aspects of the asset management market which included citing the prevalence of non-disclosure clauses in fund management agreements as unhelpful to the proper functioning of a competitive market. The NAPF’s submission also drew attention to the issue of custodial services, an area with significant barriers to entry and an increasingly narrow range of providers. Will Pomroy, added: “It is crucial that pension funds, as clients of the asset management industry, are able to have trust in the industry and be able to assess whether they are extracting value for money from their agents in the interests of their members – future pensioners.
“Presently pension funds receive many ancillary services from a narrow pool of providers commonly bundled in with core custody services. This means it is often difficult for funds to assess whether value for money is being achieved. What is clear is that there is limited innovation and often insufficient focus on client needs in this sector, and to that end we welcome the FCA’s signal that it may take a closer interest in the competitive dynamics in this market.”
