FCA consumer disclosure consultation misses the mark
The AIC has commented on the release of the FCA’s consultation paper.
The Association of Investment Companies (AIC) has commented on the release of the FCA’s consultation paper, A new product information framework for Consumer Composite Investments (CP24/30).
Richard Stone, Chief Executive of the Association of Investment Companies (AIC), said: “This long-awaited consultation misses the chance for more radical reform. Whilst there are aspects to be welcomed, the FCA’s insistence that underlying fund costs are bundled into a single figure will not help consumers make better decisions as the regulator believes. Instead it would make it near-impossible for consumers to compare costs meaningfully where funds invest in other funds.
“It would also mean a continuation of the market distortion we saw under the old regime – creating disincentives for fund managers to purchase investment companies that offer exposure to renewable energy, infrastructure and other private assets – even when they think they provide good value.
“It’s not clear from the consultation how costs will be disclosed in the distribution chain – for example, by platforms or wealth managers. It’s essential to get this right as well.
“One concerning issue is the potential for investment companies to be drawn into regulation as ‘manufacturers’. Should this arise, it would be a significant departure and impose additional burdens at a time when the FCA is seeking to be supportive of the UK stock market.
“We are pleased with some aspects of the consultation and the recognition of some of the concerns that we and others have lobbied on. It is good to see the FCA propose that both gearing costs and operating expenses are to be excluded from the new cost disclosure regime, and that past performance is included.
“However, the continued inclusion of a risk indicator based on volatility is a flawed idea that the regulator should have scrapped. Moving from a 1-7 scale to a 1-10 scale doesn’t address the fundamental concerns with this approach.
“We would urge all stakeholders to respond to the consultation. It’s essential that we seize this moment to deliver a radically improved cost disclosure regime that helps investors make better choices.”
The deadline for responses to the consultation is 20 March 2025.
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