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FCA: Fund managers are not taking client responsibility seriously

FCA chief executive Martin Wheatley says the asset management industry has a moral duty to treat clients’ money with the same care as they would their own, and that fund managers are not taking their responsibility to clients “as seriously as they could”.

Speaking at the CFA European investment conference today, Wheatley said the finance world “lost its moral compass” in the run-up to the financial crisis.

He said the concepts of ethics, integrity and professionalism were not fashionable then but are now  “an economic and social imperative”.

Wheatley said: “We should not forget that a large proportion of the money we manage is ultimately the savings and pensions of ordinary people around the world.

“Clearly this puts the industry under significant moral pressure to remember where money originates, and to act as agents of clients by putting their best interests first. To treat money with the same care as if it were our own, if you like.”

He said some asset management firms “are not taking their responsibility to clients as seriously as they could”, citing evidence of poor transparency and accountability in dealing commissions charged to customers, as well as issues over firms “pushing the definition of research” by using client commission to pay for corporate access.

Wheatley said: “Unlike annual management charges, which investors are fully aware of and on which fund managers overtly compete, incremental, transaction-based commission costs are not very transparent, are often overlooked, and are poorly disclosed.”

He added: “I have no particular concerns over the purchase of corporate access. Clearly investors have to engage with businesses they invest in.

“But questions do arise when you see cases of investment managers forking out thousands of pounds simply to gain access to the management of companies they wish to invest in. You have to ask: is this an eligible use of commission? Would we be willing to pay these sums with our own money?”

Wheatley also argued the FCA’s increasing focus on integrity and ethics should result in dividends for regulated firms, saying effective regulation is not “a zero-sum game”.


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