Total retail net sales amounted to a healthy £29.5bn in 2010, an achievement which should be applauded as the UK economy remains sluggish. However, read behind the headline figures and it is clear that asset managers are far from contented.
The survey also reveals how senior figures worry about the competitiveness of the UK as a financial services centre, while regulation is also weighing things down with some 20 different European legislative measures hitting the industry over the coming two years.
RDR
RDR is at the forefront of this regulatory change and, as one senior industry figure revealed to me yesterday, the primary worry is still that different remuneration arrangements will require a whole host of new share classes for funds.
Whatever the FSA’s outcomes, an overhaul as large as RDR will undoubtedly amount to significant costs for groups, not least the cost of additional training, literature and admin required. Is this enough perhaps to threaten the sustainability of some of the smaller players?
IMA chief executive Richard Saunders is certainly concerned about the consequences of this new wave of rule-making.
“One group that may be disproportionately affected by the regulatory agenda is smaller specialist firms,” he said in his survey foreword.
Barriers to business
“Investment management has always had relatively low barriers to entry: with no requirement for large amounts of capital, investment managers are in essence much more akin to non-financial service sector businesses than to financial firms like banks. But some interviewees suggested that the increasingly regulatory requirements could start to provide more significant barriers to entry than in the past, ultimately perhaps driving greater consolidation.”
As we have already seen, M&A activity within the financial services sector has picked up markedly in recent years and there are no signs of this abating.
Reactive and flexible, boutiques have long held favour in our industry, but it is arguably the larger players that are best placed to profit through acquisition – witness the march of Henderson over the past few years.
Elsewhere, the top-ranked firm in the survey by UK assets under management, BlackRock, has reacted against a potential loss of market share to passives – the other big concern for active managers – by buying iShares.
As Saunders rightly concludes, the industry finds itself at a “strategic crossroads”, so let’s be hopeful everyone concerned is wary of the gridlock and braced for potential crashes.
