PLSA response to FCA asset management market study consultation on fund manager governance

Our response to the FCA’s consultation on the governance of Authorised Fund Managers (AFMs) makes the case for more detailed assessments of the value for money provided by AFMs to their clients.

Pension funds have assets worth around £2.2 trillion managed by UK asset managers, so are well-placed to understand understand how the market could be improved to deliver better outcomes for their beneficiaries.

We support the FCA’s proposals to require AFMs to conduct value for money assessments and report on their findings. But our response suggests that the assessments should cover additional factors, including how the AFM has sought to oversee and shape its organisational culture, as well as the considerations proposed by the FCA, such as fees and charges or quality of service.

The response also argues for stronger independent governance of AFMs. The FCA’s proposals include a requirement for at least 25 per cent of AFM board members to be independent. Our response argues if non-independent directors comprise a majority of the board and control the Chair’s position, they are able to shape the priorities, decisions and direction of the AFM, even if the independent directors provide a robust challenge.

By contrast, AFM boards with a majority of independent directors would be subject to proper scrutiny and oversight.