Regulation to affect asset manager fee practices

impactGlobal asset managers are bracing themselves for the impact of regulation and many believe that proposed changes will affect the way they calculate fees and fund rebates.

According to a survey carried out by software provider Bonaire Software Solutions, 50% of respondents said that current proposed regulation, such as the Dodd-Frank Act in the US and the Retail Distribution Review (RDR) in the UK, will change the way they perform fee calculations. Unsurprisingly, 70% of firms expected regulatory scrutiny to increase.

Christopher John, CEO of Bonaire, said: "Regulation is putting increased pressure on firms to provide a much higher degree of fee transparency. With Dodd-Frank in the US and RDR in the UK, investment management firms are finding that they need to address new regulatory requirements while managing increasingly complex fee structures and investment products."

Conducted in the first quarter of 2011, the Bonaire annual survey polled investment management firms across the globe on the primary challenges associated with fee billing and revenue management. When asked about regulation, 30% of respondents said they believed that regulatory changes will require new audit, control or compliance reporting processes.

Fee leakage continues to be a prevalent issue as firms are potentially at risk of errantly charging their investors fees as a result of manual processing, with one out of four firms having experienced fee leakage in the past. Nearly 92% of survey respondents maintained up to 200 fee schedules and almost 60% of firms have changed their fee schedules or investment products over the last year.

John said: “Our survey results reflect what we are hearing amongst our clients – that 2011 holds tremendous change for global buy-side firms as a result of regulation."

©2011 funds europe