* Vanguard favours fee warning, against all-in fee
* Other fund managers also reject all-in fee proposal
* Funds responding to FCA interim review of sector (Recasts, adds Investment Association response)
By Simon Jessop and Carolyn Cohn
LONDON, Feb 20 (Reuters) - Asset managers on Monday marshalled their defence against proposed changes by their regulator aimed at boosting value for investors by cutting costs and increasing competition.
The Financial Conduct Authority launched a review of the industry last year aimed at overhauling Britain's 7 trillion pound ($9 trillion) asset management industry, and gave Feb. 20 as the deadline for reaction to its interim findings.
The regulator had flagged widespread concerns about the performance of actively-managed funds relative to fees charged, the level of competition in the industry and the information shared with investors to help them make decisions.
Chief among the regulator's planned solutions was the creation of a single 'all-in' fee, to help investors better understand the cost of investing, including how much the fund pays to buy and sell investments.
Industry trade body the Investment Association pushed back on that idea and instead proposed a single fund charge along with an estimate of the trading costs needed to deliver a return for investors.
"Transparency of charges and costs across the long-term savings market is a pre-requisite for building consumer trust," it said in its response. "This could provide a simpler proposition for customers to understand the cost of the professional service," it said.
Vanguard, which specialises in low-cost index trackers and exchange traded funds, said it doubted an all-in fee would be "accurate, objective or comparable", saying it would be more useful to give investors more information on how fees are charged, because funds were not uniform.
The U.S. firm, which managed $4 trillion in assets at the end of January, mainly in low-cost passive funds with about $1 trillion in active funds, said it did support better warnings about the impact of high fees, giving the issue equal prominence to warnings about past performance.
"Performance is a potential. Costs are a certainty, hence investors should focus as much, if not more, on costs," Sean Hagerty, head of Vanguard's European business, said in a statement.
"A 'health warning' on the impact of costs would be a clear sign of intent from the industry that it's putting the needs of the investor first."
The New City Initiative, a lobby group for smaller funds, said an all-in fee could hit funds focused on less liquid strategies that incur higher dealing costs and favour bigger fund managers.
Dan Brocklebank, head of the U.K. arm of active fund manager Orbis Investments, which has more than 15 billion pounds under management, said there was enough scope for the FCA to enforce existing rules on fees, "before adding additional layers of regulation".
ICI Global, the international arm of the U.S. Investment Company Institute, also warned against introducing new regulations at a time of unprecedented disruption as Britain negotiates to leave the European Union.
The watchdog's final report, along with any proposed rule changes, is expected in the summer. The deadline for consultation responses was Monday.
($1 = 0.8021 pounds) (Editing by Ruth Pitchford and David Clarke)