Plans to protect millions of savers from being ripped off have been announced by the City watchdog after an investigation into the £7tn asset management industry.
The Financial Conduct Authority (FCA) believes competition between fund managers for investors is weak and wants to improve transparency and value for money.
Customers include ordinary small-time investors looking to grow their nest eggs at a time when many cash savings accounts are struggling to deliver returns that keep pace with inflation.
A report from the FCA last November found evidence of sustained high profits in the industry over a number of years despite a large number of firms vying for customers in the market.
The watchdog has confirmed plans announced at that time for a single, all-in fee charged to investors to drive competition.
It also said it proposed to strengthen the duty of fund managers to act in the best interests of investors, and would require them to appoint at least two independent directors to their board.
Shares in “investment supermarket” Hargreaves Lansdown led the fallers on the FTSE 100, down 3% in morning trading. Wealth management firm St James’s Place was down more than 1%.
Chief executive Andrew Bailey said: “The asset management sector is important to the economy, managing the savings of millions of people and in the current low interest environment it’s vital we help people earn a return on their savings.
“We need a competitive sector, attracting investment into the United Kingdom which also works well for the people who rely on it for their financial wellbeing.
“We have listened carefully to the feedback we received in response to our report last November.
“We have put together a comprehensive package of reforms that will make competition work better and help both retail and institutional investors to make their money work well for them.”
The FCA stopped short of an immediate referral to the UK competition authority for part of the market – related to institutional investors.
But it recommended bringing investment consultants under its remit.
Martin Gilbert, chief executive of Aberdeen Asset Management, described the proposals as “constructive and sensible” and said they would “ultimately strengthen confidence and competitiveness in the UK asset management industry”.
Ryan Hughes, head of fund selection at AJ Bell, said the industry was “ripe for reform”.
“There are too many examples of fund groups making huge profits, while delivering poor returns for investors and it is clear that the regulator has its sights firmly focused on tipping this balance towards the consumer,” he said.