FCA Asset Management Market Study Interim Report

Thinking

FCA Asset Management Market Study Interim Report

The FCA Market Study Interim Report has asked searching questions about numerous aspects of the industry, making some uncomfortable reading for asset managers and investment consultants.  It has also pointed to the potential for other similar investigations singling out vertically integrated platform businesses.

We know from other industries – energy for instance, that studies such as this that lead to Market Investigation References to the Competition and Markets Authority can result in 18 months of painful data requests and analysis followed by significant change in the operating environment.  One also need only consider that penalties for actions that infringe competition rules can be drastic – 10% of global turnover - to know that this is a different type of study of the investment management industry to any previous.

If the direction of the draft findings is anything to go by, an asset manager’s Board could be asked to consider whether its governance is adequately represented by independent voices, and can clearly demonstrate that its decision making is in the interests of its clients.  Moreover, whilst they are considering that, they could also be asked the even harder question – do our products and services represent adequate value for money.

Depending on the answers to these questions there could be pronounced change to operation of the Board and changes to products, which could stress profitability and operating model without appropriate decisive action.

We at Knadel have had experience of leading a business through a period of introspection to determine what should be its strategy in the face of disruptive change.  We were able to deploy the type of tools enabling critical appraisal of product capability that could serve firms well in the current context.  We are also able to use our expertise with operating model design to support the evaluation of strategic options to respond to a likely tightening of future profit margins.

Now through our alliance with Cordium we are also able to integrate this with responding to the governance challenges that have been presented.

The next few months provide an opportunity to feed back to FCA in response to the study as a means to minimise the chances that the changes that are to come are not accompanied by unintended consequence.  That there will be change, and that there will be consequences seems beyond doubt.  Our view is that the best way to deal with them is to be on the front foot, have a house view on the market challenges and how your firm is responding… 

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By Colin Shapiro

Responsible for Product Development at Knadel, Colin is a consultant with extensive experience gained in both line and consulting roles. He has deep experience of outsourcing, having worked within the outsourcing industry as well as advising clients as a consultant.

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