The regulator has, since its interim paper last November, shone a rather bright light on the ‘big three’ institutional investment consultants – Aon Hewitt, Mercer and Willis Towers Watson – while leaving the door open for further interrogation of the platform space, which will inevitably hit the retail market.
Yet there is one group of businesses that seems to have been overlooked, possibly for falling between two stools.
In the advisory and wealth management space, ‘investment consultancies’ often refer to those offering research, ratings, information and recommended fund or buy lists.
Questions over their regulated status, or whether conflicts of interest exist, remain. And depending on the business model being operated, the questions seem to be around morals.
Using somewhat woolly language, the report said: “Several ratings agencies responded to our interim report. They acknowledged that there are conflicts within some of their business models, but argued that they manage these effectively.”
It said the lack of negative ratings in the industry was cited as evidence ratings are biased, a view shared by Rory Maguire, partner at Fundhouse.
Maguire believes two differentiating factors of his business are the adviser paying for its research rather than the fund group paying (for logo use or otherwise) and the issuance of negative ratings.
He also claims to run the only business operating in the UK that is regulated for fund research.
Maguire says with all the will in the world to build Chinese walls between fund research and consultancy and fund management or the offering of model portfolios, where a fund group is effectively paying the salaries of those deciding the ratings, such walls could become “porous” – hence his insistence on being regulated.
