Andrew Bailey, chief executive of the Financial Conduct Authority (FCA), said he expects to see improved competition within the asset management industry as a result of the regulator's package of 'remedies', which will ultimately lead to lower management costs.
During a press conference on the FCA's Final Report on its Asset Management Market study released today, Bailey (pictured) said this trend had already begun in the industry, and the report will help it along.
He said: "We are already seeing some changes in the industry and it does seem to be the case that over the recent period we have seen changes in the trend [for higher fees].
"This ought to come together with our report and I see the study as creating the framework that allows this competition to flourish. We would expect to see [active] fees come down."
In its Final Report, the regulator has reiterated its belief that active fees have remained broadly the same over the past decade, despite criticism from the Investment Association about the figures used to support this assertion.
Mary Starks, chief economist and director of competition, said: "We have had lengthy discussions with the IA. They would rather we looked at a three-year period, which shows a tail off in active fees, but over the longer run of 10 years this is imperceptible. Active fees have dipped very slightly over three years, but not nearly as much as passive fees."
However, Christopher Woolard, executive director of strategy and competition, emphasised that the FCA was not advocating passive funds over active strategies.
He told the press conference: "We never said active is bad or passive is good, we are not favouring one or the other. We want to ensure investors know what they are buying and pay the right amount for it."
He added: "Some investors think high cost means good value. We have found that retail investors' understanding of charges is often very poor."
In the Final Report of its Asset Management Market Study into competition in the sector, published today, the regulator has responded to feedback from last November's Interim Report, which was extremely critical of the actively-managed funds industry.
Among other issues, the regulator had found "weak price competition" in a number of areas of the asset management sector and had proposed an 'all-in fee' on funds.
The asset management market study was first announced in the FCA 2015/16 business plan following feedback it received as part of its wholesale sector competition review, which raised a number of questions about competition along the asset management value chain.
Originally, the Interim Report was due to be published last summer, but this was pushed back to November 2016 after the Brexit vote.
