Hargreaves Lansdown comment on FCA Asset Management Market Study
The FCA has published their final report on their Asset Management Market Study, you can find it here.
Tom McPhail, Head of Policy, Hargreaves Lansdown:
'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: they’re challenging the industry without dismantling it. We will look to work with them on their further consultation work (CP 17/18 and their working group on Objectives and Benchmarks).
It is notable the FCA highlighted their view on active vs passive investing, stating 'One point raised in the feedback, which we want to address, was a perception that our interim findings suggested that passive funds were preferable to active funds. This is not the case. Rather than focusing on one strategy over another, we think it is important that investors understand both the total cost of investing and the objectives of the fund or mandate they are investing in, so that they can choose the product that best meets their needs'.
This view reflects Hargreaves Lansdown’s own approach; we offer both active and passive funds on our platform, and we include passive funds within our Wealth 150+ list of our favourite funds. The critical test for both active and passive funds is that they offer good value for money.
We also look forward to the forthcoming publication of their Platform Market Study. Platforms play a vital role in acting as agents of competition on behalf of investors, both in challenging fund groups on value for money and in helping and guiding investors in their financial planning. We also welcome the FCA’s statement that 'The Further work [in the final report] does not change our overall conclusion that ratings and best buy lists can on average help investors identify funds that outperform funds not on the best buy lists.'
Investment research has a critical role to play in helping investors get good value and to invest with confidence: if an investor had followed Hargreaves Lansdown’s Wealth 150 research since its launch in 2003, on average they’d have beaten the relevant Investment Association sector performance, they’d have beaten the average passive funds within those sectors and they’d even have beaten the appropriate index, and that’s after taking all investment charges into account.'