Will no one rid me of this troublesome press? Mr Godfrey defends “Corporate Access”.

corporatePoor old Daniel Godfrey, the IMA’s CEO can’t seem to rid himself of the troublesome press who continue to hound him about the behavior of his member firms.

The scandal surrounds the estimated $5bn paid to intermediaries to give asset managers “access” to corporate big wigs so they can work out whether to invest in their equity and debt.

The scandal is that rather than pay this out of their own pockets, they pay for it out of a slush fund siphoned out of our savings. While fund managers claim that their fees are met from the annual management charge, it appears this slush fund is a “double charge” and forms part of the hidden fees that drag back fund performance and are largely responsible for the general underperformance of active fund managers.

I quote from a recent article by Steve Johnson in the FT

Fund managers are continuing to allocate a quarter of their $5bn-a-year commission pot to brokers that offer them access to senior company executives – despite a crackdown by regulators on this practice.

In March, the UK’s Financial Services Authority raised the prospect of multimillion pound fines for fund managers after discovering some were spending “tens of millions of pounds” a year of investors’ money on corporate access, in contravention of its regulations.

The stick may have been waved but to little avail as this year’s Thomson Reuters Extel survey, based on responses from 5,400 portfolio managers and buyside analysts, will show that 25 per cent of client commissions are still being used to reward brokers for providing corporate access, down just a fraction from 27 per cent in 2012

Naturally the IMA found it impossible to believe that its members continue to flout the law by simply rebadging “corporate access commissions” as “research”.

To no-one’s surprise the IMA had taken action which would kick the subject into the long-grass for a couple of years – (see glidepath comments below).

Mr Godfrey said the IMA had set up a working party to examine how research should be paid for.

And at the moment, the conversation is being conducted in the pages of the pink press, the FT, FTfm. Thompson Reuters, the FCA and the indefatigable Alan Miller of SCM Private.

But the reason this is not a consumer issue  is because the supply chain between the fund managers and the end investor is so twisted by vested interest , so obfuscated by those who benefit from opacity and so sloppily regulated that the issue has sat in “the black box” for years.

How helpful it would be to the IMA  if we could continue to have this conversation between ourselves and not allow it to into the wider domain.

So, in an attempt to prolong the  mis-use of savers’ money, Daniel Godfrey has offered his private e-mail daniel.godfrey@investmentuk.org to head off any further comment

This has not worked . I quote the comments from the article as they appeared early yesterday. If you have access to the FT, you may wish to check out how the conversation’s developed since then at http://www.ft.com/cms/s/0/60836fc0-cdee-11e2-a13e-00144feab7de.html#axzz2Vk0vPN1I


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1. ReportDaniel Godfrey | June 10 12:47pm | Permalink

I don’t want to bore others. Please feel free to email me daniel.godfrey@investmentuk.org and I would be happy to continue the conversation.

2. ReportMr City Insider | June 10 12:02pm | Permalink

Thank you Mr Godfrey for your comment. Why on earth should the cost of research be passed on to the fund ? – this is what happens at the moment anyway – whether disguised in extra dealing commission or paid separately as per your suggestion. As per Wikipedia, the AMC is ‘the fee that the fund company charges annually to manage the fund’ – if you really think that the job of the fund manager is not to research and decide the best securities, what are they being paid for?

3. ReportDaniel Godfrey | June 10 11:23am | Permalink

Mr City Insider – I think I know the answer to the question! And that’s why we want to see if there are better ways of paying for research. I don’t believe I miss the point, but it’s hard in a few words to express everything one might want to say. My point was that a new model might ensure that fund managers are only paying a transparent market price for research that they believe adds value – thus reducing costs for clients and improving outcomes. A new model might also either incorporate the research costs into the AMC or be structured on a transparent pass-through basis i.e. costs of research passed directly through to the fund. I can guess you would prefer the former, but although it might seem attractive to say “increase the AMC a bit to cover the cost of research that you’re no longer getting from dealing commissions as the cost of commissions has come down” this might be a blunt instrument especially if the fund grows in size.

4. Reportjbx | June 10 9:27am | Permalink

Worldweary gets a second from me. What a horrible game of mutual back scratching this all seems to be.

5. ReportWorldweary | June 10 9:07am | Permalink

Asset Managers paying for corporate access is wrong at so many levels it’s hard to know where to begin.

The Asset Managers are at fault for paying, the brokers are at fault for facilitating, the regulators are at fault for not stamping down (hard) on the practice and surely the companies are potentially liable for providing privileged information on a selective basis (I’d like to see them prove in a court of law that they did not).

But regardless of the rules, this is a clear failure of ethics and shame on you all for not seeing that!

6. ReportMr City Insider | June 10 9:01am | Permalink

Mr Godfrey – You seem to miss the point when saying that “work that adds value needs to be and should be paid for” – it already is being paid for, or at least your industry’s clients wrongly assume its already being paid for within the annual management charge. Before setting up your next quango, why not commission some IMA research asking the question “Do you expect to pay your fund manager extra for research or corporate access to the charges within the AMC?” – you won’t like the answer.

7. Reportad iudicium | June 10 7:14am | Permalink

I have no faith whatsoever in UK financial regulation. Everything is so utterly incestuous and “thieves” and “fraudsters” running major banks into the ground are never criminally prosecuted. They don’t even take their peerages off them. Lord “Idiot” of ….. So the chances of some real action on illegal corporate access payments is doubtful. Same people move around boards as NED’s, sit in the remuneration committees, making sure that the salary anti is upped constantly for the guys at the top, whilst those at the bottom struggle. Former regulators move into “fat cat” positions with banks they used to regulate with no criticism from neither the government nor the Bank of England . Its all so totally unprofessional with only the Treasury Select Committee hav.ing a serious attempt at disturbing the old boy network

8. ReportDaniel Godfrey | June 9 9:51pm | Permalink

That’s not what the Working Group’s doing. It’s looking at the way research is paid for across the whole market with a view to identifying whether the current model delivers benefits to clients that cannot otherwise be replicated and, if not, whether we can construct a proposed glide path towards a new model that has greater transparency and reduced potential for conflict of interest. Broadly speaking, investors should want fund managers to engage with managements of companies they invest in. The article makes clear that corporates are, also broadly speaking, not interested in paying brokers to arrange for roadshows. Work that adds value needs to be and should be paid for. What we have to do is identify the best, most transparent and least conflicted way of achieving that.

9. ReportMr City Insider | June 9 6:35pm | Permalink

Why is it necessary for the IMA to set up a working panel to distinguish right from wrong? The IMA must know that this is blatantly wrong and should not condone or fudge such merky practices.

I urge anyone reading this article to e-mail Daniel Godfrey and ask him just how long a glide path he would like to construct. For most of us the taking of money out of our savings is theft unless it has been agreed with the saver and authorized by the regulator. It is quite clear that the FCA does not regard the aforementioned slush fund which sits outside the AMC as legal, it is quite clear that the savers have no idea of what is gone and it seems clear to me that this practice must stop.

We do not need a glide path. If we apprehend a burglar we do not ask him to wind down his activities on a “glide path”, we tell him to stop and hopefully get him arrested.

If we are to get confidence back into pensions, we need to stamp this out. This kind of practice is clearly not universal but there is no way that anyone can do anything about this misbehavior without someone creating a lot of noise.

I intend to make a lot of noise and suggest that you send Daniel a lot of your noise too,



corporate access

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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2 Responses to Will no one rid me of this troublesome press? Mr Godfrey defends “Corporate Access”.

  1. Daniel Godfrey says:

    Henry, I can answer your questions.

    Firstly, the current system has been agreed with the saver by way of the agreement between the fund and it’s manager and it is authorised by the FCA. So it’s perfectly legitimate.

    But that doesn’t mean that another system couldn’t be better for savers and that’s why we are examining it via a working group (which has an independent oversight panel). The amounts are disclosed (although I accept it would be hard for the “man in the street” to work them out.

    If a system that works better for savers can be identified, and the system is to be fundamentally changed, it would involve business model change which can’t be done overnight. Hence the mention of glidepaths.

    How long is a glidepath?

    Not a day longer than necessary.

    Your input to the working group’s thinking would be valued. Please get I’m touch if you’d like to take the opportunity to help.

  2. Gina Miller says:

    I read your comment yesterday and was rather saddened by it but was not drawn to respond until in my usual owl like hours of catching up, read the following article Thttp://www.portfolio-adviser.com/news/trade-associations-worth-member-fee in which it quoted the IMA as being the third richest association with £5.9 m in annual fees.
    There is so much fundamentally wrong with the IMA’s attitude and your various comments under the FT expose.
    Let’s start with the most important – ethics and honesty. The inexcusable pickpocketing of clients’ money by your members as exposed by the FT and the FCA, amounts to Fagan-like behaviour that simply should not be condoned. Whether your members can legally get round the FCA wording or not through the common practise of simply relabelling corporate access payments as research, does not make it any better. The £5.9 annual income of the IMA is meant to improve the outcome for investors, promote and improve the reputation of its members and the industry; not defend the indefensible. Setting up meaningless working parties and sub-committees by the look of your comments suggests that you have set your glidepath (as you call it) to nowhere, flying on a cushion of hot air.
    Your arguments are morally and intellectually bankrupt and completely contradict the 2001 Myners report and the FCA own research conducted by OXERA in 2003 on this very subject.
    Like many fund managers, we conduct our own research on markets and funds using Bloomberg and Morningstar amongst other tools. Our clients are not charged extra for the cost of such services as they already pay for our research in the Annual Management Charge. Daniel, if you were buying a car, would you expect to pay for the car, then be charged a separate sum for the engine? Research is the engine that drives stock selection within funds and as a fundamental component of fund management, should be included in the AMC. If not, what exactly is the AMC for?
    Clients do not expect and normally do not know that your members are charging them twice to do the same job – in any other industry this is illegal and amounts to fraud. The new FCA is working at a heightened pace to quickly extinguish the long list of shoddy practices of your members, should the IMA not be doing the same?
    Your suggestion of increasing the annual management charge to compensate for any loss of income of your members is astonishing. UK fund management charges are already amongst the highest in the world and profit margins are more than double the average company – is this not enough?
    Your other suggestion is for the fund to be charged directly for such corporate access related payments again makes no sense. Funds and therefore clients would inevitably pay the same commission as before but and then face an extra charge on top. This makes no sense whatsoever but then it would seem your only regard is the profits of your members, not that of savers or investors.
    The absurdity of requiring a discussion of basic ethics via an IMA working group is astonishing. If you really have the long term interest of your members at heart than they have only one choice – face up to reality, be honest, stop double-charging. This would actually gain respect, transform the image of this once proud industry and actually encourage people to save and invest.
    Every single trustee or saver should take up your invitation to reply or their silence may be interpreted as condoning the ‘pick-a-pocket or two boys’ behaviour of your members.

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