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UPDATE 3-UK orders sweeping changes to boost transparency of funds industry

* FCA to broaden EU funds transparency rules from January

* Still to consult on competition review of consultants

* Plans market study into investment platforms (Adds more comment, details, shares)

LONDON, June 28 (Reuters) - Britain's markets watchdog announced radical changes to the country's 7 trillion pound (9 trillion) asset management industry on Wednesday, seeking to improve transparency and value for money for customers.

The Financial Conduct Authority (FCA) said it would strengthen the duty of fund managers to act in the best interests of investors and, as in the United States, require them to appoint independent directors to their boards.

Fund managers will also come under the FCA's individual accountability regime, making it easier to punish them when rules are not followed.

The reforms in a 112-page report follow an initial study last November that found a lack of competition and high profits for the industry. The FCA will now consult on how best to implement its plans.

"This is really a major piece of work. It's a major step forward," FCA Chief Executive Andrew Bailey told reporters.

"We have put together a comprehensive package of reforms that will make competition work better and help both retail and institutional investors to make their money work well for them."

The FCA said it would also launch a study into investment platforms which offer a range of funds online. That sent shares in platform provider Hargreaves Lansdown down more than 2 percent to the bottom of the UK's benchmark FTSE 100 index.

The watchdog recommended too that the government's work and pensions department remove barriers to the pooling of pension schemes, which could cut investment costs for the schemes.

FEES

The combination of measures taken by the FCA will drive down fees for investors, Bailey said.

The changes will be introduced in stages, which the industry will welcome as it faces other reforms, such as new European Union rules, and the unknown impact of Britain leaving the bloc on a sector with ties that criss-cross Europe.

On fees, the FCA said it would broaden new EU fee disclosure requirements that come into force in January. The EU rules require intermediaries to publish a single, all-in fee, and the watchdog said this practice would be a requirement across all the sector.

"The result is from the start of next year investors will get a simple disclosure of the fees they are being charged or will be charge, expressed in pounds and pence," the FCA said. It will consult later in the year on making the new EU rules work better.

Bailey said the FCA was not "gold plating" EU rules, but making them consistent across the funds sector.

"Many of the key recommendations work with the grain of European legislation already in the pipeline to introduce more clarity and transparency for consumers," the Investment Association industry body said.

Owen Lysak, a partner at Clifford Chance law firm, said introducing independent board members marked a partial move towards a more U.S.-style approach to fund governance, that could mean a cultural shift in the market.

However, some industry watchers said funds would be relieved the FCA didn't go further

"The FCA has delivered a report which spares them the harshest potential remedies flagged in their interim report last November," said Daniel Godfrey, founder of investment company The People's Trust and ex-head of trade body Investment Association.

"There's a big difference between supporting the 'disclosure of an all-in fee' and making managers actually charge an all-in fee."

CONSULTATIONS

The regulator stopped short of an immediate referral to Britain's competition authority of the market for institutional advice, but is expected to do so later in the year after a public consultation launched on Wednesday.

"Postponing this decision until September, pending further consultation, is almost certainly a delaying of the inevitable," KPMG's Head of Investment Advisory, Nick Evans, said.

It did, however, recommend the government consider bringing investment consultants under the remit of the FCA.

The FCA's November consultation paper raised hackles in the industry after it criticised asset managers for making hefty profits, and the watchdog said its final report confirmed those findings.

"This found that price competition is weak in a number of areas of the industry," the FCA said.

"Despite a large number of firms operating in the market, the FCA's analysis found evidence of sustained, high profits over a number of years."

The FCA said it also found investors are not always clear what the objectives of funds are, and fund performance is not always reported against an appropriate benchmark.

David Morrey, a partner at Grant Thornton consultancy, said the FCA had backed away from the "frontal assault" it began in November on whether actively managed funds could ever be better than passive funds.

The implementation of the "remedies" will take place in a number of stages.

The FCA has published a consultation paper, focussing on the remedies related to governance and technical changes to promote fairness for investors.

($1 = 0.7804 pounds) (Editing by Jane Merriman and Mark Potter)