In the run-up to the FCA Policy Statement 13/1 announcement, speculation was building that something big was on the cards. The twitter faithful were twitching and all interested parties were present and accounted for at their desks 7.00 am sharp.
I spent the night before the publication of the paper in a rather pleasant restaurant in Glasgow with a number of advisers. Three Brians, two Johns and an Alan to be precise. A glass of wine or two paved the way for an interesting chat on possible policy statement content and implications. The paper didn’t contain any massive surprises, which I guess was good.
The truth is, we didn’t need the FCA paper to let us know that clean is where it is all headed.
Research we did in advance of the dinner identified that all attendees planned to move their existing legacy business to clean share classes starting later this year, running into 2014. The FCA’s sunset clause, which expires on 5 April 2016, provides a line in the sand for the end of legacy payments but, for many, it was happening anyway.
There has been lots of talk about ‘clean’, ‘super clean’, and even ‘industrial clean’. The simple fact is that larger platforms will negotiate terms and others will want those terms.
Here is the thing; the three Brians, two Johns and Alan don’t really care about all the terminology and associated guff. There is even the suggestion that some don’t care about the commercials that sit behind the negotiations. All that matters is what is now commonly being referred to as the total cost of ownership to the client.
The announcement of further consultation on adjacent markets was a surprise.
There is the suggestion in the paper that the “the arguments for life companies are more complex”.
That one is lost on me. I have always been of the view that the rules regarding platforms must read across to all similar markets.
The job of defining the read across to adjacent markets is not difficult and should include Sipp operators, life companies, stockbrokers and execution-only firms. I am sure there will be others but, whatever they are, let’s get them defined, implement it all and then just get on with it.
During dinner our guests talked about the variety of approaches they adopt for investing money.
Whilst there was a great deal of variation, the need for a consistent approach to regulation was mooted as being key, with all demonstrating a focus on lowering cost for the benefit of their clients.
You can be sure that we won’t get this if some of these adjacent markets are left sitting in the long grass.
It was a little strange to find re-reg added to the list of disturbance events. It is sort of understandable given the increasing march towards clean classes but may seem a little draconian to some.
Any significant change introduces the possibility of unintended consequences. Share class conversions will rocket over the next two years; this will provide operational challenges for the fund groups and some platforms.
Margin pressure may well drive some platforms towards manufacturing their own funds and you can be sure that driving cost down will not be the key objective.
After multiple consultations, policy statements and debate spanning a time period longer than I care to remember, it’s time to cut to the chase and get on with it.
I am sure the three Brians two Johns and Alan may well have joined me in drinking to that.
Billy Mackay is marketing director at AJ Bell