Con Keating on the Investment Association, Transparency and the Overton Window

Regular readers will be aware of my views on independent oversight of fund costs and charges. To me it’s critical to a reliable measure for Value for Money; without knowing we are getting value for money, how can we have confidence in something as difficult as investing for a pension. Here is an article that Con has shared with us.


There are good reasons why we don’t ask or expect convicted criminals, the inmates of Belmarsh, Holloway or Strangeways to write our laws. Though they may be skilled and experienced in the commission of crimes, in general we do not seek their expert advice. Of course, there is the occasional exception, with Frank Abagnale particularly well-known. Here though, proven reform and remorse are preconditions, which contrasts with the recidivism that is far more common.

Against this background, it is surprising that the Investment Association should be rushing ahead with its plans for an industry disclosure code. Could it be that they wish to pre-empt regulatory action by the FCA and extend the life of the immoral and unethical status quo?

Secrecy and information asymmetry are the stock-in-trade of the asset management industry, and its trade association has form in this regard. The defenestration of its former progressive CEO, Daniel Godfrey is a recent illustration, but there are longer-running examples. The Investment Association also played a major part in the creation of the Investor Forum, a body arising from the BIS Kay review, which operates in near total secrecy. Were it not for the harm to be done to consumer savings in the interim, it would be tempting to propose the introduction of a three-strike rule on Californian lines.

This problem is by no means unique. In the author’s note prefacing her book, “Makers and Takers”, Rana Faroohar recounts an anecdote. In a meeting with a former US regulatory official, she shared the statistic that academic work showed that 93% of all the public consultation on Dodd Frank was taken from the financial industry. She then asked why this had not been broader. The response from a befuddled official was: “Who else should we have taken them with?” The Investment Association again has form; their submission to the Kay review (Turnover Research Initial Findings) demonstrates sleight of hand worthy of Maskelyne. A rather timely OECD publication, “The Governance of Regulators: Being an Independent Regulator” should be on every FCA official’s reading list.

My particular concern now lies with the involvement of the Transparency Taskforce (TTF) in the IA’s Advisory Board on charge and cost disclosure, where even the terms of reference are strictly private and confidential. I was involved in the creation of the TTF.

Having seen, over many years, industry responses to valid analytic studies, academic and professional, that were obstructive and bullying, and even included the retention of Messrs Sue, Grabbit and Runne to add weight to their threats, it seemed time for action. All the more so when clients of the fund management industry were also reporting difficulty in obtaining basic information about their investments. It was obvious that an inclusive forum, a safe haven, where these matters could be openly discussed, without fear or favour, might help to improve the situation. The argument has been touted that the IA Board should operate in secrecy since this will allow submissions to be made without fear. But there I must ask the questions: who is it that these respondents might have to fear, and how can this be a relevant concern when the Board was tasked only with examination of the output of the IA’s own technical working parties?

When setting up the TTF we were hopeful that, in the currently rapidly changing socio-political environment, it might a difference, and perhaps move the Overton window. Some five years or so ago, the Overton thesis was all the rage with right-wing US ‘shock-jock’ broadcasters. The thesis is, that at any time, there is only a limited range of ideas that are socially acceptable and these determine the politically feasible; the progression that follows from change-inducing ideas flows from unthinkable, to radical, then acceptable, sensible, popular, and finally becomes policy. Judging by the column inches in the trade and popular press, it does seem to have had some success in this, something the very existence of the IA Advisory Board would seem to confirm.

However, there is now a governance problem arising from the participation of Andy Agathangelou as a representative of the TTF in this Advisory Board. The TTF was never conceived as a body which would endorse or promote particular solutions; it was envisaged as a body where solutions could be discussed and investigated openly, with their sponsors pursuing their commercial and other interests outside of it. These arrangements were fully discussed in early TTF meetings. The very idea that a group, put together to promote transparency in very broad terms, should participate in this Advisory Board under these terms is completely anathema. Whether this is just some nebulous guilt by association or the far more serious question of joint enterprise may be a matter of intent, but it is clear that it is a conflict which was better avoided, if reputation and trustworthiness were not to be tarnished.

con keating

Con Keating

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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