25 September 2012

FSA Wheatley: My vision for conduct regulation and how it will affect asset managers

Mr Wheatley highlighted some of the issues in the sector, notably charges, competition and the gap between asset managers and the end consumer. He also explained what changes were being made in preparation for the changeover to the FCA – this change will mean a new type of regulator for the firms.

There are many reasons why regulators, government and the EU are taking an interest in asset management at the moment – whether it is the vital role you play in our economy in terms of the jobs and wealth you build, or the influence you have as allocators of capital. But, as a conduct regulator, I prefer to focus on your work managing the money of the millions of individual investors who place their trust and confidence in you.

In today’s world – with final salary pensions becoming a rarity and state support shrinking – those of working age have a huge degree of uncertainty around their financial futures. Those of us fortunate enough to have pension and investment savings are hugely reliant on the investments that your firms select.

I am struck by the trust involved when we hand over our money to your firms to manage. We forgo pleasure and spending today to put money aside for tomorrow, in the hope that we have entrusted it to people who will help it to grow. We do not know what we are going to get back – it is not like a bank account when we know the return we are going to get –  even if it is a miserly one!  We need to trust your firms’ integrity and character and your investment managers’ analysis, skill and judgement. 

The good news is that we benefit here in the UK from huge expertise, and a world-leading industry.  From firms with 200 years of heritage to new start-ups, we have a wide range of investment styles, asset classes and sectors to choose from. 

We are ensuring the firms that sell these products really think about who they are appropriate for, and only sell them to those people.  What will no longer happen is people being persuaded to cash in their final salary pension and invest it through a self-invested pension in schemes based on off-plan property in eastern Europe or golf courses in Mexico – which is what has been happening up until now.

We have been clear with firms here, and that is going to be a feature of the FCA. We are going to communicate with you and with consumers in a way that you will understand. We will move away from jargon and regulatory speak. When we consult you on rule changes, we will try to do things face-to-face, we will issue fewer consultations and when we do, they will be more concise and to the point.

Our supervision of your firms will be more focused on your conduct. In particular, this will be about the conduct at the very top of your firms. Senior management teams set the culture of their organisations so we must ensure that the targets and aspirations set their turn into good outcomes for consumers.

At the heart of the FCA will be a new department that acts as the radar of our new organisation – combining research into what is happening in the market and to consumers, and better analysis of the risks out there. They will then feed that in to our policymaking and our supervision of firms. We want to really understand what is happening to your customers, the deal they are getting and the issues they face.

Full speech

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