With the final report of the Financial Conduct Authority on its study into competition in UK asset management due before the end of June, speculation is mounting as to its likely contents.
I hear the fund industry has been lobbying hard to persuade the regulator to water down some of the proposals contained in the hard-hitting interim report, issued last November.
Industry commentators have been studying closely comments made by FCA director of strategy and competition Christopher Woolard in an address to the PLSA Investment Conference last week for any indication as to which way the regulator might be leaning. Some, including Mick McAteer from the Financial Inclusion Centre, have expressed concern that the FCA may be looking to avoid regulation. However my colleague Andy Agathangelou at the Transparency Task Force says he is expecting the FCA to regulate.
I certainly hope he’s right. Self-regulation of UK asset management has consistently failed, over several decades, to deliver anything like satisfactory outcomes for end-investors. The Investment Association is happy to have endless consultations — to give the appearance that it’s moving in the right direction — while doing its utmost to keep things exactly as they are.
I agree with Andy. It’s time to face up to the fact that self-regulation hasn’t worked. Proper regulation is now essential, and it’s the FCA that should be leading on it, not the industry trade body.
You can read Andy’s press release on the issue here:
Transparency Task Force: Comment on Chris Woolard’s speech to the PLSA Conference
Comments on Chris Woolard's speach at the PLSA Conference
Alternatively, here are the main bullet points:
Self-regulation has failed
“The shocking findings of the FCA’s Asset Management Market Study is all the evidence that could ever be needed that entrusting the financial services sector to self-regulate has been wishful thinking to the point of naivety on the part of previous Regulators. Decades of pseudo self-regulation has failed to prevent the terrible miss-selling scandals that have caused extensive consumer detriment and sapped the public’s trust in the sector.”
The FCA needs to lead
“Understandably, trade bodies have a primary duty to care for the commercial interests of their members; that in itself is absolutely fine, but given that reality, trade bodies and professional associations are clearly too conflicted to be responsible for the development of a costs disclosure code; especially if they are unable to wholeheartedly support the idea of putting the investors’ interests first.
“We believe that it is far better if the sector as a whole works together to produce a ‘blanket’ solution rather than a ‘patchwork quilt of protocols’ and for all that work to be properly led by the FCA; regulators are best placed to regulate.”
Performance reporting is a big concern
“If Schroders are right in stating recently that their approach to reporting is ‘in line with standard industry practice’ then this is clearly another huge problem that the FCA must investigate straight away because investors deserve clear, complete and credible information on performance; just like they need clear, complete and credible information on costs.”
Industry own goals are sapping public confidence
“Ministers must be getting concerned that there is a continuous drip, drip, drip of revelations about the UK’s asset management industry – it corrodes confidence in our financial system and that’s the last thing our economy needs in a post-Brexit world. Given the public’s low levels of trust in the financial service sector the industry as a whole really should be ultra-transparent on everything it communicates to the market so we can start to regain the trust that has been lost; the industry just keeps on scoring own goals and this needs to stop.”
Reluctance to put customers first invites scrutiny
“Any sector that seems reluctant to put the interest of its clients first and foremost is inviting scrutiny and the more people look into the workings of the asset management industry the more they seem to find.”
Robin is a journalist and campaigner for positive change in global investing. He runs Regis Media, a niche provider of content marketing for financial advice firms with an evidence-based investment philosophy. He also works as a consultant to other disruptive firms in the investing sector.
