The UK financial regulator, the Financial Conduct Authority (FCA), has conducted a review finding that "limited clarity over price and quality of services makes it difficult for clients to assess whether they are getting value for money" in investment and corporate banking.
It is launching its first investigation into the UK's wholesale banking market, a move the Financial Times today says "stunned the banking community."
The FCA also says it will "consider undertaking a market study into asset management and related services later in the year." However, "for the other potential competition issues identified, it is expected that forthcoming regulations will affect the way competition works, so there are no immediate plans to conduct further studies into these areas."
William Wright, founder and managing director of the capital markets forum and think-tank New Financial, says: "It is a paradox that while the asset management industry - like the rest of the wholesale financial markets - looks fiercely competitive from the outside, with many different firms offering a wide range of products, it perhaps does not always display the characteristics of a fully competitive market, particularly in areas such as fee structures and transparency."
"That fees have remained broadly constant relative to assets under management over the past decade suggests that there could be more scope for competition to play a bigger role" he adds.
Feeling The Squeeze? Report On Pay At Asset Managers And Investment Banks - a report just out, shows that although pay at investment banks has fallen by more than a quarter since before the financial crisis, it is still very high compared with the real world.
Average compensation cost per employee at investment banks of $288,000 (described as an imperfect but constant proxy for pay per employee) last year equates to actual pay of about $245,000 (€185,000 or £150,000). "That is six times median full-time earnings in the UK and just above the level of earnings needed to qualify for the top 1%" says New Financial.
Pay has fallen from roughly half of revenues at investment banks in the five years before the crisis to around 40% since, resulting in profits in 2013 that were more than 50% higher than they otherwise might have been, it says.
But in asset management firms average pay per employee has increased by one-fifth to $263,000 since before the crisis and has been rising steadily for the past decade.
"Pay in asset management used to be half the level of investment banks. Last year it was more than 90%" says New Financial.
In the name of better corporate governance, institutional investors have in recent years become more publicly vocal about the remuneration policies of businesses in which they invest. Alongside gender diversity, remuneration has been in the spotlight. There has been a welcome sense of the asset managers looking like the 'good guys' when it comes to stewardship and direction for business.
But the level of noise from the asset management industry about executive pay in the UK is definitely coming down. Attention is moving away to issues such as board evaluation and succession planning. Those leading voices in the industry approached for comment on the findings on their on pay in the New Financial report, declined.
"Governance in its broadest form is about getting the balance right at a firm between customers, staff and shareholders - all of whom need feeding" says Mr Wright. The report shows an enormous growth in size of asset managers, but no corresponding gain in scale and efficiency for clients. "Revenues relative to AUM are constant and pay relative to revenues is constant" he says. Clients - as stakeholders - have not benefited from lower fees.
New Financial has published its report under the section of its website entitled 'Rebuilding Trust.' While it has already been widely read in the financial services industry as yet another 'pay ranking', it is intended to be far more than that.
"In banking and finance, the question of pay and bonuses is not just about the numbers. Instead, it is an important barometer of the shifting balance in how the capital markets industry thinks about itself in relation to its shareholders, to its clients, and to society" it says.
