This month we bring you the best bits from various regulators' speeches about the future regulatory model, improvements for standards in financial advice and what’s next for the FCA-Pensions Regulator joint strategy. Read on also for rumours of changes to the rules for unit-linked funds and new rules for non-UCITS retail schemes.

A change in the rules for unit-linked funds

The FCA has reviewed "the governance practices of firms covering the value to investors provided by unit-linked funds." In doing so, the regulator is considering a change to its rules.

This review is part of the FCA’s wider review of non-workplace pensions, the governance of unit-linked mirror funds and the effectiveness and scope of Independent Governance Committees (IGCs).

The regulator has taken an interest in this area because unit-linked funds offer features that are similar to those of authorised funds. Unit-linked funds are also, according to the FCA, the dominant fund structure through which people save for their defined contribution pensions, so the regulator was looking for similarities between the governance of unit-linked funds and authorised funds.

The regulator came to several conclusions.

• Firms ought to think again about the value for money of these funds and their fees. Some funds had fees and charges that meant they led to outcomes similar to those of much lower risk products.
• Firms could not explain the reasons for disparities in fees and charges, which varied widely from fund to similar fund.
• They were not making enough efforts to pass savings from economies of scale on to unit holders if not contractually obliged to do so.
• Firms complied with regulatory initiatives but did not go any further to benefit other customers.
• Though asset management accounted for a very small part of the total charges, firms could not show the FCA how other charged features offered good value for money.
• Though firms compared their prices with those of their competitors, they did not do so to price competitively. Instead, they used the findings to justify their own pricing structures.
• Institutional investors, advised by investment consultants, received more competitive prices than retail investors. They were better able to lower the firms’ fees and charges and were more active in monitoring firms’ performance.
• Independent Governance Committees and Governance Advisory Arrangements had positive 'quick wins' in areas involving expensive workplace pensions with poor results for investors but otherwise these bodies expressed frustration at their irrelevance.

The FCA plans to assess the findings for this review along with other work in this area and will decide what, if anything, needs to change. As yet there is no defined timescale for this decision.