Regulation  

Fisher says Towry has nothing to fear as FCA launches probe

A Financial Conduct Authority thematic review into potential conflicts of interest at investment firms recommending in-house investments will not affect Towry because it does not manufacture its own funds, the firm’s outgoing chief executive Andrew Fisher has said.

A spokesperson for the regulator said the review into conflicts of interest at firms that recommend in-house funds, which will target vertically integrated firms and is one of a number of reviews set out for the coming year in the FCA’s 2014/15 business plan, has already begun.

Speaking to FTAdviser, Mr Fisher said the review would likely cover companies whose advisers could put client money into funds manufactured by their own firm, citing banks in particular as being in the regulator’s crosshairs.

He added that a potential conflict of interest exists in relation to referrals from Towry’s financial planning arm to its discretionary fund management business.

However, he stated that the firm and its remuneration is structured in such a way as to mitigate the risk of conflicts. He also said the discretionary arm uses only external funds.

Towry has faced questions in the past over such referrals, with criticisms raised by among others former Money Management editor Janet Walford over opaque charging and performance figures discussed during its failed court action against former Edward Jones advisers.

According to the final judgement handed down in February 2012, Towry employees are paid by salary as well as a bonus, with bonuses depending on personal performance and “the achievement of their targets as well as the company’s overall performance”.

The judgement cites Mr Fisher as describing Towry’s discretionary ‘independent investment management service’ as the company’s “core proposition”.

Mr Fisher told FTAdviser: “The work [the thematic review] is for those people placing clients in funds where they manage the funds themselves. The banks... manage the money in-house in their own funds and that potentially could lead to a conflict of interest.

“We think what the FCA [is] doing is saying, ‘does the firm recognise the conflict?’ - and Towry does - and, ‘does it put things in place to mitigate that or make things worse?’.

“[Towry employees] are only paid salaries and bonuses, there are no financial targets in the company and we only receive payments from clients not any third parties. It mitigates it at every point we think.

“We still have an interest in doing business.”

Last week Towry revealed that Mr Fisher would step down from his position as chief executive, to be replaced by ex-Prudential UK chief executive Rob Devey.

Another large advisory firm which places clients into in-house investment funds is St James’s Place. Last year, advisers raised questions over the firm’s bundling of adviser charges following changes to adviser remuneration rules.

Although SJP could not supply comment at time of writing, it previously stated its charges were compliant with the Retail Distribution Review and had been cleared by the FCA. It also cited its vertically integrated structure to explain its charging methods.