Ryan Hughes, head of active portfolios at AJ Bell, comments on the findings of the FCA review of host Authorised Fund Management (AFM) firms:
“The FCA had made clear some time ago that they wanted to look closer at the host AFM market in light of events with Link and Woodford to ensure that investors could have confidence in the outsourced AFM model. The initial findings of this review perhaps unsurprisingly conclude that there are areas that can be improved, particularly around due diligence and managing conflicts of interest, although quite rightly the FCA acknowledge that some of the findings apply as much to in house AFM management as to those outsource.
“Some of the findings from the FCA will be of concern, particularly a lack of adequate oversight, a lack of in depth understanding and a lack of evidence around robust governance procedures. It is exactly these kind of challenges that have been discussed at length regarding the Woodford situation and given the issues found by the FCA, it seems unsurprising that they intend to follow up with all host AFM firms over the next 12-18 months to ensure that all of the areas of weakness have been addressed.
“More broadly, the findings in this this report will need to be carefully considered by all AFM operators, both host and in house. It would seem sensible for every asset manager to digest the findings here and ensure that the AFM is effectively following the clear principles laid out by the FCA.”