LGIM’s Hynes forecasts more rule change for funds

LGIM’s Hynes forecasts more rule change for funds

Legal & General’s Simon Hynes expects regulatory change to dominate developments for UK fund groups this year.

The head of UK retail distribution at Legal & General Investment Management pointed to the Financial Conduct Authority's asset management report, which he said was described by some as "benign".

But he warned this could mark the start of a regulatory overhaul in the fund management industry.

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“With final rules to come and the promise of more far-reaching investigation, the spotlight will continue to fall on asset managers," Mr Hynes told FTAdviser.

“Meanwhile, other parts of the value chain could increasingly fall subject to regulatory and media scrutiny.” 

The head of retail distribution said oversupply in the asset management market is “evident”, pointing to the 1,840 asset managers which the FCA currently authorises.

This year has been marked by a surge in merger and acquisition deals among wealth management firms, with the larger intermediaries getting bigger.

As a result of this, he said wealth manager buy lists, which are a set of pre-selected funds for clients to invest in, are now "even more crucial".

"In the game of ‘mutual funds musical chairs’, chairs are being removed as expected, the remaining chairs are plush and very appealing, but the fund group participants seem as numerous as ever."

He questioned what could prompt a "long-awaited consolidation binge" in asset management firms, adding: "This is difficult to gauge, but sterling’s fall has surely made them more attractive to foreign buyers."

Commenting on the advice market, Mr Hynes said advisers have had a “relatively free run” since the Retail Distribution Review, particularly as the population is in greater need of their services than ever before. 

“While we can be rightly proud of the increasing professionalism of the UK’s advice market – with record numbers of individuals holding certified or chartered financial planner status – questions about value may remain.” 

Mr Hynes said: “Perhaps for the first time since RDR, the regulator has stated it intends to do further work on the role of advisers and platforms in the UK. 

“While advisers rarely seem to be in competition for clients, the pricing pressure already seen on platform fees and passive fund costs may make a 1 per cent annual advice fee look a little disproportionate on a relative basis.”  

He also pointed out that over the last few years LGIM has benefited from having both passive and active funds, and said the firm will aim to bring more outcome-oriented solutions to the market in 2017. 

“In the passive space, LGIM will widen its fund choice with new and interesting options for wealth managers and portfolio builders. 

“In the active space, LGIM has significant talent in both fixed income and equities – which, for too long, we feel has only really been evident to institutional investors.”