Some U.K. managers have fallen short of Financial Conduct Authority requirements when it comes to annual fee assessments.
The FCA said Tuesday that some firms devoted too little time to reviewing costs of asset management and distribution, focusing instead on administration service charges that cost investors relatively little.
The rules under its Senior Managers and Certification Regime require firms' top executives to assess whether fund fees are justified by the value provided to investors.
However, in its latest review, the FCA found that some firms did not consider whether their funds meet objectives when weighed against their investment policies and investment strategies — and if existing fees are justified.
The FCA also noted that firms did not meet the reporting standards when they presented incomplete assessments that were lacking details about fund performance, costs and share classes.
Also, some independent board directors did not provide expected challenges to fees and appeared to lack sufficient understanding of relevant fund rules, the FCA said.
The FCA now wants managers to address their shortcomings and gave firms 12 to 18 months to comply with the rules.
The findings were the result of interviews the FCA had with 18 firms from July 2020 to May 2021 about assessments of their fee structures, known as value assessments, which must be reported to investors together with actions plans aimed at reducing unjustified charges.
Value assessment reporting was introduced following the FCA's inquiry in 2017 into the asset management industry, which concluded that the fee competition in the sector needs to improve.