Fee transparency: The age of enlightenment

Fee transparency: The age of enlightenment

The Transparency Task Force (TTF) has launched a new community to facilitate collaboration among asset managers that have a more enlightened and progressive approach.

The initiative was triggered by the publication of the Financial Conduct Authority’s (FCA) Asset Management Market Study Final Report, presented by senior competition department executives Becky Young and Robin Finer at the TTF’s special Transparency Symposium held on July 5 in London.

This will be the TTF’s ninth collaborative community, each working on a separate issue. We’re calling this new group Team PAM, for progressive asset managers.

Member firms will already be completely comfortable with high levels of transparency on costs and charges so they are well-suited to operating in the post-FCA Report world.

Members will also possess one or more of these attractive characteristics: enlightened leadership; orientated to capital markets being a force for good; striving to deliver value for money; an evidence-based approach; advanced use of technology; an inclusive ownership structure, such as mutuality; a fee structure aligned with clients’ interests; focus on the longer term; and/or determination to serve their clients’ best interests.

We have already had our inaugural conference call and it has become obvious very quickly that there is much to be gained.

The firms attracted to this initiative do not fear each other or the regulator; they are confident in the inherent strength of their offerings and are already working to high ethical standards.

It’s early days for the initiative – just 48 hours at the time of writing – but Sparrows Capital, IG Group, Vontobel Asset Management, eVestor and Hermes Investment Management have already joined as founder members.

As with all our communities, it will be down to founder members to agree on objectives and the best strategies to achieve them.

Any firm that has a pro-transparency and pro-client way of working is welcome as a founder member, so long as they join ahead of our next conference call on August 3.

There are absolutely no fees; members just need to commit doing what they can, when they can, however they can, to help improve the way the sector as a whole operates and is seen.

It’s all about displaying values-based leadership for the greater good, and understanding how enlightened self-interest can work in the real world.

Membership is open to active and passive managers, as being tribalistic would just get in the way of progress.

The sector is too complex and nuanced to be viewed in overly- simplistic, binary terms.

For example, I really like the way that some active managers have fee structures that align to clients’ interests while others that are dead serious about stewardship.

What really matters is the mindset of the firm’s leadership; whether the client is seen as somebody to be served, or somebody to be exploited through information asymmetry.

CULTURE IS KEY

My aspiration is that Team PAM will accelerate the culture- change underway in the industry, just as the FCA’s work most certainly will.

In my view, corrosive cultures have been the root cause of the reputational damage the sector has suffered in recent years.

You’ve only got to think about how few asset managers signed up to Daniel Godfrey’s Investment Principles when he was leading the Investment Association, and his subsequent forced departure, to realise there are deep-rooted cultural issues that need exorcising.

One can’t help wonder whether the FCA’s Market Study would have been needed had his visionary leadership not been undermined by those that either failed to see the bigger picture or, more likely, turned a Nelsonian eye to it.

Members of Team PAM will be challenging themselves to display behaviour consistently that will help to rebuild trust in the sector.

It will be made up of thought leaders who don’t run away from the opportunity to commit to serving clients’ best interests. They will be delivering what the market wants.

Now that the FCA is making the changes necessary to allow the invisible hand of competition to work its magic, we can expect more enlightened and progressive firms to flourish.

I may be naïve but, if we assume the FCA regulates for a competitive market, the only conclusion I come to is that doing the right thing makes complete sense both culturally and commercially.

If you agree, please get in touch.

Andy Agathangelou is the founding chair of the Transparency Task Force

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