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FCA announces next steps for unit-linked funds

FCA has published its findings and next steps on its review of governance practices covering unit-linked funds. It notes that its Asset Management Market Study found asset managers were not good enough at considering whether they deliver good value generally – but the package of remedies aimed at addressing this does not apply to unit-linked funds. Similarly, there are no specific rules at individual fund level that apply to insurers.

FCA has now carried out a separate review and has found similarities between the fund and insurance sectors, and is particularly concerned about how unit holders’ interests are taken into account in decisions around fees and charges. It wants to see firms takinga wider view, to include consideration of the manager’s performance, how fees compare with similar funds and making best use of economies of scale.  It also found that firms will comply with regulatory interventions but are unlikely to go further than required.

FCA did not a positive, if limited, impact of independent governance bodies and will generally continue to monitor in this area alongside its work on non-workplace pensions, the governance of unit-linked mirror funds and the effectiveness and scope of IGCs.

Barry Stimpson

Barry Stimpson