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Michael Folger

More than a passing resemblance to Paul Newman, don&#39t you think?” asks FSA

press officer Jackie Blyth as she hands me a photo of director of

investment business Michael Folger, a piece of information which is duly

filed in case he needs to be charmed.

But it turns out that such journalistic tricks are not needed. He is the

one who does all the disarming with a few winks and a steady gaze. Just the

sort of social skills you would expect from a man who has mixed with some

of the most powerful people in the country during the course of his career.

Folger, 51, spent 14 years at the Treasury between 1971 and 1986. As head

of the economics briefing division, he was responsible with coming up with

“killer facts for Mrs Thatcher&#39s handbag” which he delivered to her on a


His other major role at the Treasury was overseeing the defence budget –

but that is a subject he cannot talk about for another 30 years under the

Official Secrets Act.

Like a true civil servant, he refuses to be drawn on his political

orientation, saying he “votes for common sense and sometimes the wrapper


But the thrill of public office eventually wore off and Folger went over

to the private sector in the mid-1980s when he joined the London office of

investment bank Dean Witter in the Eurobond division.

He says: “It offered a different set of experiences – I arrived in Angola

during the civil war, for example – and the salaries were better.”

In 1991, he was headhunted for the position of managing director at Nirex,

the radioactive waste specialist. Folger says he was chosen for being the

only person in the country who understood a balance sheet, how the

Government worked and basic phy-sics, which he studied briefly while at

Selwyn College, Cambridge, before switching to economics.

IFAs might think his involvement with such a disaster-prone industry stood

him in good stead for his next career move to the FSA.

What attracted him to the role? “I was intrigued by the FSA and thought it

would be exciting to bring together different cultures into one. I also

have to balance statutory objectives and consumer thinking with companies&#39

needs to make a living.”

The FSA&#39s investment business division supervises some 6,000 financial

services firms, including IFAs, on behalf of the self-regulatory

organisations, the PIA, Imro and SFA.

It also has the main responsibility within the FSA for policy on the

conduct of investment business, including polarisation, and preparation of

the conduct of business sourcebook, which sets out the rules and guidance

which will apply once the Financial Services and Markets Act comes into


Does he share IFAs&#39 view that the burden of compliance is too great at

present? He says: “I hope it is not a universal perception. I am aware that

the pension review was very painful and bruising and we hope to get

busi-ness right first time in future.

“In time, we want a constructive relationship with the IFA sector and plan

to move away from an adversarial one by working with the grain of the

industry. That includes dealing with the rise of the more demanding


But IFAs do not seem too willing to extend the hand of friendship. They

view the regulator as “bureaucratic”, “heavy-handed” and “threatening”

although they do say they look forward to the “FSA in its new shape” or, as

one puts it, “a grown-up regulator”.

Since joining the FSA in June 1998, Folger has led its approach to

specific issues such as mortgage endowments and stakeholder pensions, which

are still high on the FSA&#39s list of priorities.

Folger says one of the biggest challenges with stakeholder is getting

people interested in pensions, a fact borne out by recent research into

decision trees which saw consumers abandon them through boredom.

He says the Government is planning a campaign to publicise the low-cost

product and the FSA&#39s consumer division is compiling an information

package. But he warns that employers will also have to get in on the act if

stakeholder is to succeed.

Folger says the FSA will be publish its findings on endowments in the

autumn after the reprojection letters currently being sent out – three

million so far – have had their full effect. He says: “We are pleased

people are not panicking and cashing in their policies.”

A personal challenge for Folger is finding “25 hours a day”. The 12 hours

he spends working each day are taken up by a constant round of meetings and

reading in order to keep abreast of policy.

His colleagues confirm this, calling him hard working and focused.

Perhaps the nature of his work is why he takes refuge in woodwork at his

home in Dulwich. He explains: “I enjoy working with my hands. Woodwork is

something I can have within my control that does not involve going through

six committees.”

Folger also gets wrapped up in looking after his two boys, aged eight and

11. He is “not currently married” although he has tied the knot twice in

the past and does not rule out a third time.

As for what else lies ahead, he says: “I would like to be remembered as

someone who makes a difference, including at the FSA.”



SRCE: Money Marketing

PDAT: 060700


SCTN: Technology

PGNO: 36


HDLN: Supermarkets will not leave IFAs on shelf




It seems that every time you turn round, someone has opened a so-called

fund supermarket.

Generically, this is a concept that allows investors and IFAs to access

managed funds from a wide range of providers via a single route.

Fund supermarkets are, of course, yet another example of new methods of

financial management being imported from the US where, according to a

recent report by Cerulli Associates, they now account for around 80 per

cent of all new fund inflows.

Their share of all mutual funds under management in the US has tripled to

9 per cent in the last three years.

The Cerulli report goes on to predict that, by 2005, similar organisations

in the UK will account for 35 to 40 per cent of net inflow to mutual


Forrester, which has also examined this issue in detail in its recent

report, Insurance Supermarkets Arrive, predicts a more conservative market

penetration but still ascribes a 20 per cent market share to fund

supermarkets by 2005.

The US market is dominated by two major players, Charles Schwab and

Fidelity. Cerulli is suggesting that although there will be in excess of a

dozen such services open by the first quarter of next year, only four or

five will survive.

I do not believe these predictions take sufficient account of the

differences bet-ween UK and US distribution channels and the very vibrant,

not to say resilient, nature of the IFA community.

Both the dominant US supermarkets include strong direct equity services.

While individual share ownership has surged in the UK over the last 18

months, due in no small part to the existence of online share dealing,

there have been a number of reports recently to suggest that the decline of

dotcom stocks may now have reined in the extent of such growth.

But to underestimate the potential effect of supermarkets would be a grave

error. Fund supermarkets certainly present a challenge to the IFA community

in its position as the dominant distributor of managed funds.

The latest figures from Autif show that, in the year to May 2000, IFAs

were responsible for nearly 55 per cent of new managed fund business

although only achieving 41.6 per cent of sales linked to Isas.

Are fund supermarkets friends or foes? The answer is almost certainly

both. Supermarkets come in many shapes and sizes. Some, such as

Consolidated Funds, are only available via IFAs. Others, such as Fidelity,

are open to both the company&#39s IFA business partners and direct customers.

Egg has its own super-market for collective investments and will also be

adding share dealing.

InterAlliance&#39s site allows consumers to purchase funds but offers no

aggregation facilities as a supermarket. The recently launched has at least as many supermarket characteristics as the

InterAlliance site but Virgin is keen to say it is not a supermarket.

Confused? Imagine what it is like for the consumer.

There can be no doubt that some of the so-called supermarkets seek to

replace the traditional IFA relationship. However, as Egg Investments

operations and systems director William Jones noted at last week&#39s

e-commerce Lunch Vox run by Mansion House Executive, running an internet

operation means you can do without the phone but you still need people who

can answer quickly and competently.

Even though many of the supermarket sites such as Egg are offering a wide

range of research and decision trees, I believe IFAs have the opportunity

to harness the power of the information offered in this way and complement

it with customer-focused advice as the best value-added proposition for the


In the US, Charles Schwab has a very active programme, Advisor Source,

which directs customers with holdings of over $100,000 towards professional

advisers. Several UK operations are indicating that they will take a

similar approach and this could be one of the main services that IFAs might

look for in choosing their supermarket partner.

Equally, the supermarkets may well have a role in incubating the smaller

investor until such a time as they have sufficient investments to warrant

taking financial advice.

For the individual making a modest investment of £100 a month or less

into an Isa, either the adviser is going to be giving advice on which they

are not covering their costs or, if the advice is fee-based, the cost is

likely to be totally disproportionate to the level of investment.

In these circumstances, some sort of low-cost or even free guidance could

assist an investor before the level at which it becomes cost-effective for

them to take advice.

It is important to recognise that choosing which supermarket to work with

will probably be one of the most imp-ortant strategic decisions that IFAs

will make. Increasingly, the sort of technology services provided as part

of such partnerships will have a key effect on the management of the whole

IFA practice.

I foresee a day when this type of service could replace the need for many

IFAs to have their current small back-office systems. Such is the nature of

many of the services in planning that it will not be practical for IFAs to

spread clients across multiple systems. Asset allocation is a perfect

example of where this could occur.

Currently, there is a fair amount of pessimism around the industry over

the potential outcome of the London School of Economics report on

polarisation. This is not a view I share. Having looked at how fund

supermarkets are operated in other countries such as Australia, I believe

that a move to the white-labelling option could provide an opportunity for

the continued existence of an environment which allows IFAs to offer advice

on products from a wide range of different fund managers, without the

current polarised environment.

The concept of independent advice has served consumers and IFAs well but

the technology is increasingly available that may well make it entirely

appropriate to move to the next phase of financial planning. In such an

evolution, fund supermarkets would have a major role to play.


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