The need for a dedicated hub for asset management firms going through the authorisation process has been called into question by some who say there are more pressing problems hitting the industry.
Clive Waller, managing director of CWC Research, said the UK funds industry was already saturated, questioning why the FCA was embarking on a new project while its asset management market study had been “kicked into the long grass”.
“The FCA is supposed to be a regulator. There is no shortage of funds. You can access 40,000 from the UK. I suspect that’s enough,” he said.
“The speed with which the market is moving to ETFs and trackers is a demonstration of the market working.”
Waller added: “So, in short, why are they going off on something new that doesn’t need fixing?”
Authorisation hub
The FCA said the hub will be open from October 2017 offering advice, clarity and “personalised engagement” to firms going through the process of gaining authorisation.
The regulator’s executive director of supervision for investment Megan Butler, said it was “imperative” that firms weren’t put off operating in the UK because of “avoidable barriers to entry”.
While welcoming the move by the FCA to encourage start-up firms, the UK director of APFI (Association of Professional Fund Investors) Jon Beckett suggested it should look at simplifying the regulation itself and reduce levies for smaller asset managers to manage fee pressure.
“Boutiques remain squeezed between regulators and third-party services such as custodians and authorised corporate directors who can also squeeze smaller firms on cost. All of which is an obstacle between fund manager and investor,” Beckett said.
“Asset concentration, index duplication and supertanker funds remain a systemic threat to innovation and competition in fund markets and a concern for professional fund investors globally.”
Start-ups fight back against M&A
Not all voices were critical, and Rory Maguire, managing director of fund adviser firm Fundhouse, said it signalled a “fantastic development” based on his past experience with Project Innovate, a similar FCA hub for fintech.
“These hubs encourage a few things and each is good for the client – accountability, competition and innovation – as new entrants need to consider their differentiation from existing participants,” he said.
Introducing more firms to the industry would avoid dominance by the few big players as consolidation increases, Maguire said, and it could also impact fees.
“We also see how fees are standardised because, in many respects, asset management is an exercise in asset gathering and differentiation across firms is not that easy anymore.
“Hopefully, if more boutiques are formed on the back of this, they can introduce more pricing differentiation, particularly if their capacity is limited.”
