Asset managers plan to raise standards
Poorly managed asset management groups face censure as the UK steps up its campaign to give investors better value for money.
The Investment Association, which represents more than £5tn of investor money in the UK asset management business, will publish a statement of investment principles over the next few months in an industry-wide crackdown to raise standards.
Daniel Godfrey, chief executive of the Investment Association, said: “We need to look at the big picture, which is about making investment better and making sure investment managers are able to demonstrate how they give customers a fair deal and put their interests first.”
Customers have become more sceptical over the ability of active fund managers to offer a fair service since the financial crisis as performance has failed to live up to promises, while fees were often considered excessive and hidden in commissions.
Although the Investment Association is a trade body and unlikely to issue fines or take punitive action against its own members, it could name and shame poorly managed companies. This would then put pressure on those groups and possibly encourage investors to switch their money to companies that met the required standards.
The statement of principles, which is being drawn up by a group of lawyers and compliance experts, is likely to be made up of seven or eight key principles.
These are expected to include warnings to firms against favouring new clients with lower fees to win their business or by offering selected groups the most sought-after stocks, such as newly listed companies that are only on offer to a limited number of customers.
It will also demand high standards of transparency and warn groups that they must offer value for money and put the customer first.
To make sure firms comply, the Investment Association, which changed its name from the Investment Management Association this year, is likely to insist member firms set up an independent panel or draw up an independent report to show standards are being met. This aims to provide investors with a credible assurance that the principles are being adhered to.
The Investment Association plans to consult the UK regulator, the Financial Conduct Authority, and hopes to build on other UK initiatives such as the creation of an Investor Forum, which aims to strengthen the power of shareholders over issues such as executive pay, and the Retail Distribution Review, which has cracked down on hidden commissions and charges.
Leading investment groups have backed the move, saying that an industry-wide set of standards will help restore trust between clients and fund managers, which has been damaged by the traumas of the financial crisis and scandals such as the Madoff affair.
Elizabeth Corley, Allianz Global Investors chief executive who was awarded a CBE by the Queen in the new year honours, told a conference in London recently: “We have a trust deficit and we need to acknowledge it.”