Industry faces up to EU regulation

Paul Chavasse, head of investment management at Rathbones, says that while it was so far unclear exactly what the new FCA Wealth Management and Private Banking division would do, its approach seemed to be the right one.

He explains: “It looks like it will be more intrusive and investigative and that is a good thing because it was too ‘laissez faire’ before.”

Mr Chavasse suggests that a focus just on the wealth management industry should be welcomed because the industry is still widely misunderstood, and has been included within regulations in the RDR that were meant for advisers but were imposed on wealth management firms as well without due consideration.

However, renewed focus on the wealth management industry, which is already reeling from the imposition of transparency brought on by the RDR, might not be readily accepted by firms that have for so long revelled in the opacity of their industry.

Mr Chavasse adds: “The problem is that most of the industry is now too terrified of fines, every week you read the news and there is another fine.

“Rathbones is still big enough to have relationship management team at FCA but with the changes at the regulator, unless you are close to our size everything has to go through a call centre or a body like Apcims. If everyone is worried that if they go and say something to the regulator they may be hit over the head instead, they will not approach with a question.”

The FCA is not even the only problem for the future of regulation. Tim May, chief executive of the Wealth Management Association, claims that roughly 75 per cent of the firm’s resources are currently being channelled into lobbying against regulations from the EU.

He warns against the potential impact of the upcoming packaged retail investment products (Prips) regulation, which he said could crucify the equity and bond market in the UK.

But EU regulation is likely to affect the broader industry as a whole, and it is the potential for new or more heavily enforced rules brought on by the advent of the new wealth management division of the FCA that means DFMs are likely to face even more scrutiny in the future.

That is the way the tide of transparency is flowing, and while discretionary managers may resent it, it is a necessary evil and will improve the industry in the long term.

Matthew Jeynes is senior reporter at Investment Adviser