Competition and Asset Management Conference overview

Last week the FCA and Said Business School jointly hosted a two-day conference to explore a range of questions that are of interest to regulators, academics and practitioners.

The audience also had an opportunity to hear from Helena Morrissey, Chair of the Investment Association, and Professor John Kay, author of the 2012 Kay Report on the UK equity markets. The discussion was conducted under the Chatham House Rule and was an interactive combination of panel discussions and audience Q&As, which ensured that a range of views were heard.

A range of topics was discussed, and some common themes arose as part of the discussions, including how investors can determine value for money for asset management products, how behavioural biases may impact both investor and asset manager behaviour and the role of advisors in affecting the way that investors can achieve value for money.

There was also discussion around the importance of scale and the impact that has on achieving value. Participants considered the potential benefits to smaller pension funds of aggregating their funds - this is an interesting consideration especially in the context of the Government’s recent proposal to merge a number of local government pension funds.

When thinking about larger investors, we heard about the benefits of moving some core asset management services in house but also the likely monetary and non-monetary cost associated with doing this. The likely differences in the level of trustee and/or employer oversight in defined contribution (DC) schemes and defined benefit (DB) schemes also emerged from the discussion, signalling the need to ensure that as DC schemes become increasingly prevalent, those in charge of selecting and monitoring asset managers have the right tools to support them in discharging their responsibilities to end investors.

There was an insightful debate about some of the reputational challenges which asset managers face and the links with issues of trust. According to a recent survey, only 12% of consumers have trust in their asset managers, the lowest out of all financial services providers surveyed – including investment banks. This may be particularly relevant given the recent pension freedoms and the possibility that asset managers will offer retirement solutions to those taking advantage of the pension freedoms who will be looking for someone to trust with their retirement pot.

On the role of advisors, it was interesting to hear concerns that the fiduciary management services offered by investment consultants can lead to conflicts of interest, which are not always managed well. It was suggested that large institutional investors may be better placed to manage that relationship, using advisors on specific and discrete issues.

Mary Starks, Director of Competition, in her closing remarks highlighted some of the themes coming out of the conference and explained why the FCA was interested in competition in the asset management sector. Mary announced that the FCA will be launching its asset management market study later this month with the publication of terms of reference on 18 November 2015. The useful insights gained from these discussions will be fed in to the asset management market study. As part of the market study we will also be hosting a number of roundtables and bilateral meetings which will give an opportunity for stakeholders to share their views with us.