The FCA has published a speech given by Martin Wheatley, Chief Executive of the FCA on dealing commission.
In his speech, Mr Wheatley focused on asset management in the UK and the European context. He commended the cooperation from industry participants over the last nine months and the willingness of firms themselves to move debates forward which has enabled very complex issues and difficult conversations to be resolved satisfactorily. Mr Wheatley also maintained that throughout the process, he has been and continues to be very much of the view that effective financial regulation is not a zero-sum game, where for one side to win the other has to lose
The questions that have created the most debate centre around issues such as whether there is proper scrutiny of spending on external research by fund managers, whether value for money is being achieved, whether the bundling of services into execution arrangements masks underlying value and whether it allows fair competition for providers of independent research. Such questions are even more important, for the industry going forward, not only because of the move towards greater transparency and integrity, but also because of the international focus of the asset management industry.
Discussions with international regulators and IOSCO are ongoing in a continuing effort to create a level playing field for firms across Europe in respect of the prevention of research in return for dealing commissions. Transparency and value for money for the client is still perceived to be quite low amongst industry experts. With the significant changes that MiFID II is bringing into effect, Mr Wheatley reiterated that now is the opportune time for firms to incorporate open and transparent measures into their overall approach to the benefit of their EU clients.
Along with this, client satisfaction remained at the top of the asset management agenda across the board. Although asset managers should be operating in the best interests of investors, it is still questionable whether this practice is indeed occurring and how consistent this is between firms and within firms. With over 70% of asset manager conference attendees maintaining that the current funding model for research does not work in the best interests of the clients, plenty of work has yet to be done.
View Dealing commission, 10 July 2014