Investment Trusts  

Godfrey says IA has kicked principles into 'long grass'

 

Investment houses will have to find their own way to demonstrate they put customers first after a requirement for firms to provide credible assurance was kicked into the long grass.       

According to Daniel Godfrey, former chief executive of the Investment Association (IA), the principles of association he proposed in January 2015 for members of the trade body caused so much contention these have been "consigned" to the long grass.

He told Investment Adviser's Julia Faurschou he was disappointed the proposed principles - something around which the industry could group - had been supported by some members of the IA but disliked by other members of the trade body.

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He said some members might have been worried that signing these could have led to them having to face legal or regulatory action "at some point in the future".

Mr Godfrey, who took the helm at the IA back in 2012, said: "Individual firms will have to find their own ways of demonstrating their commitment to putting clients first, if that is what they want to do, rather than collecting around a single set of principles that the general public would understand.

"I have seen some expressions from the Investment Association itself that this is already covered by regulation, but I have always thought it would be better to give people 10 principles to say 'This is how we look after you', rather than giving them a 2,000-page Financial Conduct Authority rulebook and telling them 'have a look in here'."

A statement from the IA on the principles is available on its website.

Mr Godfrey left the IA in October 2015 - after several influential members were understood to be so unhappy they threatened to leave.

He is considering "whether it is possible" to set up an investment trust that does not have any "conventional conflicts of interest" as it will be 100 per cent owned by its shareholders, and not paying out bonuses to its executives.

He commented: "The idea is to genuinely say to shareholders that there is nothing these executives can do to earn more money.

"You remove the conflicts of interest, but then to create a strong alignment of interests, then any executives working for directly for the trust would be paid partly in shares of that trust, which they would be required to hold for a long time.

"This means their wealth would only be affected by seeing the investment trust rise in value in a way that is risk-appropriate and at the lowest possible cost."

Mr Godfrey has just finished a short-term contract as a policy adviser for the FCA.