Don’t put money on the outcome of the FCA’s fund managers’ study

Outlook

FCA (Reuters)

If you care to think about it, Britain’s fund management industry has rather a lot to answer for. It was complicit in Fred Goodwin’s mad plan to break up ABN Amro while he was running Royal Bank of Scotland, by dint of its members casting their votes in favour of the deal.

Bloated executive pay packages of highly questionable economic value to investors have become the norm because fund managers typically make a fuss about only the most egregious examples of corporate greed. They have also presided over the cut-price sale of some of this country’s best companies, while cycling clients’ money into Kazakh copper miners and Swiss commodity traders.

Unfortunately, none of these high crimes and misdemeanours will be considered by the “market study” the Financial Conduct Authority has just announced. The FCA lacks the power to intervene in these areas. But it can look at the issue of fees and how money managers “compete to offer value” (if they actually do). As such it has pledged to consider “whether asset managers are motivated and able to control costs along the value chain”. It will also look at conflicts of interest along with an effect that “investment consultants have on competition for institutional asset management”.

Will any of this have an impact? The tone adopted by Christopher Woolard, director of strategy and competition at the FCA, is discursive and non-confrontational. “The UK is a world leader in asset management,” he gushes, before explaining that the watchdog’s study is aimed at ensuring “that both retail and institutional investors can get value for money”.

The muted tone taken by Mr Woolard hasn’t stopped the industry’s defenders from leaping in and complaining about the risks posed by the work he and his team are planning.

If the Treasury hasn’t have taken note of their concerns, the industry’s corps of lobbyists will ensure that it soon will. The Treasury has already sought to clip the watchdog’s wings by pushing out its chief executive, Martin Wheatley, for being too tough with the City.

It would come as no surprise if the phone lines between Whitehall and Canary Wharf start to run hot after the industry’s lobbyists have got to work concerning the planned study. These are early days. But if the FCA’s work doesn’t amount to much, perhaps we shouldn’t be too surprised.