The balance of regulatory geo-politics has changed
(did I really write that!)
I guess most baby boomers like me grew up thinking that (at least in matters financial), Britain could look to America for progressive policy and practice.
This is no longer the case. Not since Sabanes-Oxley has America given us a policy lead that we have adopted, the big steps in financial legislation, Priips, Mifid II and whatever will come out of the Asset Management Market Study, are European or British/European making.
I say this with pride. I still feel European in my attitude to financial matters, aligning myself with best practice alongside the Dutch, Scandinavians and Germans. If this sounds sweepingly northernist it is- the further I look towards the Mediterranean , the less enthralled I am with the European model.
The United States gets it wrong.
After this rare foray (for me) into geo-politics, I will try to re-ground the mother- ship in some instances. After a flirtation with transparency, the United States Labour Department has proposed an 18 months delay in the so-called i“fiduciary rule”.
This significantly increases the likelihood the Fiduciary Rule getting diluted or destroyed. With it will go the hopes of American consumers getting of banning hidden fees, egregious commissions and conflicts of interest that cost savers billions of dollars a year.
The changes will be made in the “interests of savers” – less choice, higher regulatory costs leading to higher prices – well that’s what the financial lobby says. The regulators who drafted the fiduciary rule are now out of a job, the new regulators, appointed by Donald Trump, are – of course – in the pocket of the financial lobbyists. Any regulatory gain has to be supported by a consumer lobby at least as strong as the financial lobby and it appears that American consumerism is astonishingly weak. Trump appears to be getting away with it.
Britain gets it right
Meanwhile , precisely the opposite is happening here. Here we have a strong consumer lobby, not just championed by the Lewis’ and the Millers and Ros Altmann, but also a lobby within financial services, that has its most obvious manifestation in Andy Agethangelou’s transparency task-force. We should not underestimate the strength having Andy and his well organised and well spoken groups , gives to the FCA in its endeavours.
Against this new consumerism, the traditional financial lobby in the UK seems powerless, the Investment Association and the ABI are having to take a back-seat as Dr Chris Sier puts together his advisory group. This is absolutely right, the IA have shown time and time again a failure to promote policy that favours the consumer. Their legacy has been the 36% margin that the fund management can achieve at the consumer’s expense.
Not as simple as all that?
Of course it isn’t as black and white as that. We read today that two of the largest UK based Hedge Funds, Tudor and Howard Brevan, are to abandon Mifid and ride rough-shod over the reporting requirements it would place upon them. Presumably they feel, like RBS a decade a year ago, that they are above regulation, too powerful to fail and that they have no need to explain themselves.
These firms, and those like them, have no place managing our money and I hope that organisations like Share Action, the PLSA, PIRC and Manifest will make it clear where they are involved and lead investors in another direction.
So where did the news of these two come from? From the FT of course, who put this information into the public domain because we have a free press that is not in the pocket of the hedge funds and their advertising revenues and is aligned with the interests of the bulk of their readers, who are consumers and not suppliers of financial services.
Actually it really is as simple as that. We in Europe are better organised and more joined up and it really is harder for the financial services community to put one over on us. The 36% margins currently achieved by the fund management interests are not sustainable precisely because we have a free press, we can blog freely, we can set up transparency task-forces and we can empower Government and Regulators to stand up to the bully boys, both in fund management and in the investment advisory business.
Well I’m proud to be British (European)
I have grown up looking to the United States for a lead in financial matters, I no longer need to do this. I am now happily living in Britain, part of the British/European regulatory framework and I am proud to do so.