Catherine Howarth is passionate about reconnecting the public to the investment world. The chief executive of ShareAction, the charity that promotes responsible investment, has made it her personal mission to bring people closer to the institutions they are invested in.
She says: “We are trying to bring people at pension funds face-to-face with clients. This is an organisation that is going to have an influence. I am interested in what firms are doing and what decisions they are making on people’s behalf. People sometimes don’t know that side of things but when they come together there is some magic about it.”
Howarth joined ShareAction in July 2008, having previously been the founder and lead organiser of West London Citizens. Earlier in her career she was senior researcher at the New Policy Institute and also spent five years as a member nominated trustee of The Pensions Trust, serving for four years on its investment committee.
Her battle for more transparency and accountability in the investment world stems from one key issue.
“A very tiny elite of the economy is making decisions on my and many other people’s behalf without having any sense of what our real lives are at all. An industry that is this important – that looks after our money – should be better connected to people’s lives and realities, and we should be able to see what they are really up to.”
ShareAction’s agenda has never been busier thanks to the recent intense AGM season, which attracted a lot of media attention. She points to BP’s meeting in April, one of the first of the season, where 60 per cent of shareholders voted against a multi-million pound pay package for its chief executive.
“A large group of investors thought that this deal was really wrong and if you get one of the first meetings of the season with a big defeat from its members, that becomes a little contagious. These days, shareholders don’t want to be on the wrong side of the majority vote; they don’t want to be the people that vote just to support a pay deal.”
Some players are making the right moves but that almost puts them at a competitive disadvantage against those that shamelessly carry on as they were
On the topic of fund fees and transparency in the asset management world more specifically, Howarth believes the media plays a key role in reporting on any misconduct.
“Fund managers don’t always show their fees because they don’t have to. There is such a compelling case for regulation here and so it is good to see the FCA is doing a major review. I think it is going to find that this is a market with huge information asymmetry, and very complicated products and fee structures.
“Not only should there be strong rules around the requirement to make transparent all kinds of fees and underlying costs that get pushed on to the consumer, but they should be presented in a standardised way that allows third parties, such as journalists or the FCA itself, to produce a really clear ranking that can compare like to like.”
“Some individual players are making the right moves but that almost puts them at a competitive disadvantage against those that shamelessly carry on as they were.”
Howarth says a tougher response from the regulator should come in the form of a cap on fees but should also provide greater insight and clarity on incentive structures. Indeed, while she is encouraged by the “amazing” movement around fees and charges, she believes more needs to be done in exploring what the charges are actually levied for, what incentivises those in the asset management world and whether it is good for customers.
“We are looking into pay incentives, researching this area and understanding the fees, but more on what the fees are actually paying for. Obviously they pay mostly for salaries, of which a lot are made up of bonuses, so we are looking at how people are incentivised. We want to see a truly responsible investment system where investors are focused on long-term company performance, including how they interact with customers.”
Howarth sees ShareAction, which has grown from four to 24 people in eight years, as a watchdog that encourages firms to do the right thing. For her, this is crucial, as the asset management industry now has a bigger role to play in the wider society.
She says: “Asset managers are systemically important in the sense that millions of consumers depend on them. It is a different type of systemic risk to the banks but one day there will be a system whereby people will not have enough to live on in their retirement so asset managers have an incredibly important role to play in the economy and society.
“The UK public pensions payouts are one of the lowest in Europe and we have all this dependency on income in old age in this industry. But that is a scenario in which you do need some pretty good regulation.”
As Howarth meets with more industry experts, she expects her battle to continue. Indeed, the path ahead seems long.
She says: “I am not cynical about people in the industry but I am a bit cynical about some of the dynamics and drivers at a company level. The status quo is very powerful, especially when you have a lot of vested interest supporting it, and on the other side the consumer is both powerless and in the dark.
“That doesn’t make our job easy but it makes it important. And that is what gets me up in the morning.”
What’s the best advice you’ve received?
Never stereotype people you can challenge.
What keeps you awake at night?
Raising money for ShareAction.
If I was in charge of the FCA for a day, I would…
Send them out to talk to the people on the street.
Any advice for new advisers?
Tap into the mindset of millennials.
2008-present: Chief executive, ShareAction
2007-2013: Member nominated trustee of The Pensions Trust
2000-2008: Founder and lead organiser, West London Citizens
1996-2000: Senior researcher, New Policy Institute