Investors must be quoted an "all-in fee" to make charges more transparent in a shake-up of the investment sector, the City regulator has confirmed.
The Financial Conduct Authority (FCA) said that the asset management sector held the savings of millions of people.
Yet despite "sustained, high profits" for these firms, there was weak price competition and no link between higher fees and better performance.
Fund managers will face stricter rules following the regulator's review.
"In the current low-interest environment, it is vital we help people earn a return on their savings. We need a competitive sector, attracting investment into the United Kingdom which also works well for the people who rely on it for their financial well-being," said Andrew Bailey, FCA chief executive.
"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."
This includes greater price clarity, with each firm declaring a complete annual fee, rather than the current mix of different charges. The FCA found that firms it sampled had an average profit margin of 36%.
The FCA also said it would launch a review of investment platforms - an announcement that led the share prices of some of the largest operators to fall in early trading on Wednesday.
What is the asset management sector?
- Manages almost £7 trillion of assets in the UK by deciding where to invest clients' money in enterprises in the UK and overseas
- More than £1tn of this is for individual investors
- Another £3tn is in UK pension funds and £2.7tn is for overseas clients
- More than three-quarters of UK households have occupational or personal pensions that use asset managers' services
- They include 11 million people who have stocks and shares Isas, as well as nine million saving for retirement in defined contribution pensions
The FCA has been investigating the sector and published its final report on Wednesday. There was a strong response from the industry following the interim report, published in November. Yet the headline measures announced in the interim report have now been confirmed.
Fund managers - who pick the stocks they think will succeed - will have a stronger duty to act in the best interests of investors. They will also be required to appoint a minimum of two independent directors to their boards.
Standardised disclosure of costs and charges will be required for institutional investors, although not for individual investors. There will not be a price cap.
The FCA will also recommend to the Department for Work and Pensions that pension schemes should be allowed to pool their investments in order to seek out better returns.
The Investment Association, which represents the sector, welcomed the report but said caution was needed on implementation.
"Asset managers compete every day to attract clients and investors and are focused on delivering the best outcomes for them. Our priority now is to have a meaningful dialogue with the regulator about the implementation of the recommendations, to ensure savers are getting the best possible deal," said chief executive Chris Cummings.
"A pragmatic timetable is key to achieving this, given the major regulatory changes already in the pipeline and the preparations for Brexit."
Others are divided on the significance of the FCA's actions.
Jake McQuitty, partner at UK law firm TLT, said: "Today, the FCA has hit the nuclear button and ended a decade of mild encouragement, sending a clear message to the asset management sector that it not only expects but now demands a transparent, customer-focused approach, particularly in relation to pricing and investor outcomes."
Some argue that the FCA did not go far enough.
"Consistent and standardised fee disclosure in a single number is vital for ordinary investors to make better choices," said Gina Miller, of SCM Direct.
"This should be mandated by the FCA to retail and institutional investors alike, rather than just institutional investors, or it is inevitable that differing formats by investment groups will make easy comparisons impossible."
Analysis: Simon Gompertz, BBC personal finance correspondent
Are you shocked at the charges which some fund managers are skimming off your savings? If you look at what the financial watchdog has sniffed out, you probably should be.
The total levied amounts to 1.5% a year on a typical share-based investment fund, in which the manager picks the shares. It can be confusing. There is a headline charge, then often other fees on top.
What are you getting for that? After all, you could be in a tracker fund which automatically follows a share index, charging just 0.2%.
The FCA found that on average, the cheapest funds generated higher returns than the most expensive ones.
Of course, an individual whizzkid manager might achieve stellar returns. But, typically, the more you pay, the less you seem to get.