Mr Lyttleton and his homeopathist wife Delphine are understood to be the couple arrested on April 30 in connection with an investigation into insider dealing and market abuse.
Neither has been charged and BlackRock has stressed it is not under investigation, but advisers said the arrest could still harm the reputation of the investment industry.
“It does reinforce the bad image of investment professionals, which is unfortunate because the industry does a good job on the whole for people and so it will not help us,” said Scott Gallacher, director of Rowley Turton.
The financial services industry has suffered a number of scandals since the financial crisis, largely focused on the banking sector, such as payment protection insurance mis-selling and the Libor scandal.
Alan Dick, partner at Forty Two Wealth Management, said the reputation of the asset management industry was already tarnished because “a lot of people perceive fund managers and bankers in the same group”.
He said the arrests would confirm people’s sceptical views. Rowley Turton’s Mr Gallacher added that “people think insider trading goes on all the time anyway” and this may reinforce that concern.
Robin Keyte, director of Keyte Financial Services, said he hoped that incidences of insider trading are few and far between in the asset management industry.
Mr Keyte said it would be “hard” to recommend clients entrust their money to the asset management industry if he thought insider dealing was rife, adding that advisers “have to have confidence” in the overall system.
However, Alistair Cunningham, director of Wingate Financial Planning, said the latest reports would not significantly damage the asset management industry because they were “just a small drop in a big ocean of negative news”.
He said: “A day barely goes by when you do not get some bad news about the banks or fund managers or the financial services industry – there is just a lot of negative press.”
Mr Gallacher agreed that, while there might be damage to the industry’s reputation in some circles, most people would probably not even notice anything had happened.
“It is not good for the industry, but perhaps we worry about it more than the man in the street, who will be more worried about what is going on in the eurozone, or just won’t pay attention to the financial sections of papers anyway,” he said.
Regulator starts getting tough
The UK’s financial regulators have been upping their efforts to clamp down on suspected criminal activity within the industry.