FCA: IFAs can sit on fund group boards as independent directors

The FCA has confirmed that appointing financial advisers to be independent directors on the boards of asset management firms would not necessarily breach conflict of interest rules.

In new rules the FCA put forward to improve the asset management sector earlier this month, the regulator said it wants fund houses to hire independent directors to sit on their fund boards in an attempt to enhance transparency in their governance.

Fund managers must have at least two independent directors on their boards and they should make up a minimum 25 per cent of board positions, the FCA ruled.

Speaking to Money Marketing, the FCA has confirmed that such a duty could be also filled by IFAs and former IFAs provided they remain sufficiently independent from the manager.

The rules set out in the policy statement include guidance on what would meet the definition of independence, such as the need to supply “input and challenge” to the asset managers’ assessment of value.

As for any other eligible independent director, IFAs may be asked to fulfill other tasks on boards, taking into consideration remuneration and conflict of interest rules, the FCA says.

IFAs must also have “sufficient expertise and experience” to make judgements as to whether the asset manager is managing the scheme in the best interest of investors.

The rules say the independent director could have gained the expertise through professional experience, public service, or academia, and does not need to relate to the financial services industry.

The FCA estimates that the hiring of new independent directors to fund management boards will cost firms a total of nearly £28m a year. It said there will be a need for 480 non-executives overall.

Postcard Planning director Rohan Sivajoti says: “It’s about managing any conflict of interest if your client has money with that asset management firm. I might consider it but it has to be separate from our fund selection approach.”



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There are 5 comments at the moment, we would love to hear your opinion too.

  1. If IFAs do sit on fund manager boards I hope very much that one of their priorities would be to use their influence to persuade their fellow directors that value includes sufficient resources to provide a decent service to clients and intermediaries.
    In particular, an inability to respond to straightforward inquiries in less than say a few days is a disgrace and requires some action at board level to improve service standards. Also, apparently never ending music and fatuous recorded messages repeated ad nauseam about unprecedented volumes of calls and the heartbreaking necessity to keep us waiting, are pure bilge. Put some more staff in these (as perceived by the providers)non productive areas and try to offer an acceptable service.

    • I think that would then become a conflict.

      Surely an IFA would be there to provide views independent from their position and not seek to see their position improved from their involvement.

      • You may well be right Matt but personally I would not be able to resist the temptation of telling the board-who after all control the organisation-that some significant reorganisation is necessary in order to provide an acceptable service level which with many such players is woeful. My view is that the service level is part of the value on offer and after all the FCA have said “…what would meet the definition of independence, such as the need to supply “input and challenge” to the asset managers’ assessment of value…”.

  2. IFA’s appointed to the board of asset managers, dream on. If you have ever worked as an IFA in a fund management company, you will completely understand why I say this. Watch an episode of Blackadder and you will get the idea.

  3. Andrew Macintyre 19th April 2018 at 2:27 pm

    IFAs on the board of asset managers? Sounds like a bit of potential for conflict of interest.

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