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Govt set to impose fiduciary duties on investment advisers

Vince Cable 480

The Government is set to impose fiduciary duties on investment advisers as part of plans to rebuild trust in financial services.

Speaking at the National Association on Pension Funds corporate governance conference yesterday, business secretary Vince Cable set out the Government’s response to economist John Kay’s review into long-term decision making in business, published in July.

It will seek to define fiduciary duties for all investment intermediaries including advisers, brokers and trustees by ordering reviews from the Law Commission and Financial Conduct Authority.

The FCA will consider whether its regulatory rules and approach support these standards and the Government will seek to change EU rules where necessary.

The Law Commission will review the legal obligations on investment intermediaries seeking to act in their clients’ best interests and report back as soon as it can.

Cable said: “Trust is the product of behaviour – a commitment to act with integrity and expect integrity from each other.

“We are making it clear that all intermediaries should act in good faith in the long-term interests of clients or beneficiaries.

“These standards should be universal and immutable. We need to achieve them by making sure that our regulatory framework supports them – but also by promoting them as behavioural norms in the investment industry.”

In his Government-commissioned report, Kay also identified a particular problem in how the performance of active asset managers is currently measured. He argues there is too much focus on the short-term and competition with other managers ahead of long-term value.

Cable said: “Pension schemes and other asset holders need to issue clear mandates for active asset managers. They must set targets to achieve absolute returns that meet the needs of savers rather than just chasing the market.

“That approach will send a strong signal that it is time the short-termism ended and was replaced by a clear-sighted focus on long-term value creation.”

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. “The Government is set to impose fiduciary duties on investment advisers as part of plans to rebuild trust in financial services.”

    Sorry but the majority of the population will not understand what a fiduciary duty is so I fail to see how this will rebuild trust?

  2. I thought we already did all of this under FSA regulation? Seems like a lot of talk about nothing therefore!

  3. meddling politicians 23rd November 2012 at 8:12 pm

    industry claptrap, more reviews, more redtape, less public intrest in pensions, whats the matter Vince not tinkered with the rules in the last 5 minutes need another change? why dont you focus on something useful like how QE & politicans have raided pensions and ruined them? hurry up and quit talking about something you do have the skill to fix

  4. It was short termism of our governments in a flight to credit and leveraging rather than investment, pensions and savings.

    Th eissue we have was governments short termism not the industry, Cable trying to place the blame of the pensions black hole away from Government – Gordon Brown, the withdrawal of advice to the masses to the practitioners that had to follow government policy.

  5. How about the same duty being imposed on our MP’s and civil servants as they make financial decisions involving £billions of tax payers money, sadly often wasting huge sums?

  6. Incompetent Regulators Award Team 25th November 2012 at 6:30 pm

    This guy needs to understand financial services as he understands very little. Where he needs to look is at the failed FSA etc. They are the ones that have created the lack of trust in financial servies and saving industry. Which all points back to governments.

    Like other people in power he wouldn’t recognise where the problems start even if it smacked him on the nose.

    He neds to get a job!

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