Watchdog FCA tells asset managers to review cost disclosures

By Huw Jones

LONDON (Reuters) - Asset managers are calculating transaction costs for products inconsistently and sometimes inaccurately, raising the risk of confusing retail investors, Britain's Financial Conduct Authority (FCA) said on Thursday.

The watchdog is looking at how to improve "value for money" for retail and institutional investors by making it easier to compare products and clarity on costs and fees.

"Asset managers should review their cost disclosures to ensure that they are clear, fair and not misleading," the FCA said in a statement.

It follows a review that began last year into the impact of new European Union product disclosure rules, known as PRIIPs, and into a sweeping revision of EU securities rules, known as MiFID II.

"While awareness of the rules appears good, we found that firms take inconsistent approaches, risking confusion for customers, who may be misled about how much they are being charged," FCA Chief Executive Andrew Bailey said in a statement.

"We are aware that many firms are finding aspects of the calculations difficult or are making inaccurate calculations. We will work with firms to help them ensure their reporting is accurate."

But he said public claims that asset managers were deliberately not complying with the new rules had not been supported by the evidence.

Wealth managers and retail platforms that sell products were also interpreting the new disclosure rules inconsistently in some cases, making it hard for investors to compare products properly, the FCA said.

This month, the FCA gave asset managers a year to introduce a common "template" spelling out costs and fees to large customers like pension schemes.

The Investment Association, an industry body, said asset managers were committed to applying the EU rules and would work with the FCA to ensure that customers get reliable, clear and meaningful information.

PRIIPs, or packaged retail investment and insurance products, require sellers of investment funds, life insurance and some pension schemes to disclose specific information.

Asset managers say changes are needed as the rules create confusing and unreliable figures that sometimes result in negative, zero or very high transaction costs.

The FCA said it would work closely with EU regulators who are reviewing the law this year.

Britain is due to leave the bloc next month and wants a transition deal that would mean continuing to apply EU rules until the end of 2020, making it difficult for the FCA to diverge from Brussels for now.

The FCA said unrepresentative transaction costs were largely due to poor application of the rules by firms.

It also put out to public consultation proposed requirements on pension scheme governance bodies to disclose costs and charges to members.

(Reporting by Huw Jones; Editing by Mark Potter and Edmund Blair)