Esma moves to stop asset managers overcharging investors

investor_fees_regulationThe EU markets regulator has called for greater coordination between member states to prevent asset managers from overcharging retail investors, putting fund fees in the spotlight once again.

Asset manager costs significantly reduce final financial returns for investors, according to the European Securities and Markets Authority (Esma), which has highlighted that fees have decreased only marginally in recent years. 

If an asset manager is found to be charging costs that cannot be justified, retail investors may be entitled to compensation.

In a briefing published earlier in June, the regulator urged fund houses to clearly identify and quantify all costs that come with any given investment product in a bid to promote transparency.

This would require asset managers having to reveal where fees go: whether they are paid to the management firm itself, or to third parties such as brokers and administrators.

Esma’s requirements also aim to make investment information more comprehensive and easily accessible for retail investors, allowing them to assess past performance and costs of products across the block.

Commenting on the move, vice-president and senior analyst at US financial services firm Moody’s, Marina Cremonese, said: “This will also allow investors – and competitors – to compare products far more easily.”

“As a result, we expect continued downward pressure on asset management fees and the improved transparency to drive investors towards cheaper passive funds that track a market-weighted index or portfolio.”

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