But there is nothing wrong with a little bit of both, and it is never easy to see good, British-born business being taken abroad – not when the jobs hot foot it away, too. While it is the household names that hog the headlines, the UK’s technology sector is another case in point.
We can talk about Silicon Roundabout all we like, but many of our real success stories are snapped up by US firms before they are barely fledglings.
In the face of all this, the UK asset management sector has to be seen as a great British success – if not a flawless one. It is an industry that by size is second only to the US globally. Managing £7trn total assets and employing more than 37,000 people, the UK asset management industry is a valuable and vital strength to the UK economy.
But there’s no time for complacency, and it is interesting to see that the Financial Conduct Authority (FCA) recently launched a new asset management authorisation hub to make it easier for firms to understand how the organisation works, make a complete submission, and generally facilitate new entrants to the market.
In true entrepreneurial-supporting style, the hub seeks “to provide end-to-end support for firms moving through the start-up cycle”.
This initiative is hugely welcome – we absolutely should be encouraging innovation and nurturing young talent in a supportive regulatory framework. Seven Investment Management (7IM) recently marked its 15-year anniversary – could we have benefited from such a hub when we were starting out?
While I hesitate to say it was “different for us”, I’d wager that it was: when we were setting up 7IM, Tom Sheridan, my chief executive, and myself already had 40 years’ financial services experience between us, and that is not counting the tenure of the other five co-founders.
But the more we can do to remove the barriers to innovation, help and encourage potential new entrants to roll up their sleeves, and yes, smash that glass ceiling, the better.
Do I wish we could have set up 7IM sooner? Absolutely, but in our case I am not sure we could have done. 7IM was set up to challenge all the things we did not like about the asset management sector. And that came out of pure disenchantment with the industry we had worked in for so long.
Laudable history
History and legacy can be a source of great strength and the UK’s asset management industry has exactly this. From pen prints of 18th century stockbrokers in the London coffee houses of Jonathan’s and the like, through to the bragging days of the Empire, this industry has grown and prospered, and especially on the international trading centre that London had become.
Key points
- The FCA has launched a hub to help new entrants to the asset management sector
- The dead wood in the active management sector should be cleared out
- Passives can be used by active managers
Such a vivid colour of this older background world is something to be proud of, but while you can be proud of it, you do not live in it.
The attitudes in some quarters of the UK asset management sector have all too often, in my opinion, been about running investments for their own benefit and not so especially for the supposed prime beneficiary, their client. The industry needs to remember that it is a privilege to be asked to look after people’s money, not a right.
One of the great advantages in the UK investment world has been the ability to innovate new investment ideas, products and services. However, the reluctance of an entrenched industry to adopt such innovations for the private client has sometimes seemed to be almost Luddite in style. Equities and bonds of course might be at the heart of investment, but the institutional world has been operating with other tools and facilities.
Tracker funds
Then there is the question of traditional active fund managers in the industry. Many have been called out as no more than tracker funds, and thus it was inevitable that someone (only in California, of course) would challenge this clique with a simple cheaper tracking and tradable product – the exchange-traded fund (ETF).
This, though, is not the death knell for the active management industry, but rather a call for its reinvigoration. That is, to clear out the dead wood and let those who provide great value be appreciated for the true worth and take the lampreys off the rest of the sector.
The innovation of passives is not the answer to all failings, but rather another excellent and cost-effective tool for asset managers to use. So both active and passive have their place, but both have to define and demonstrate their value in a portfolio.
The next great change will come with further technological developments, not just with their very basic robo services, but through the real interaction with clients on a live basis.
Already the excitement of gaming software is being appreciated as a key way of not just engaging, but also educating and inspiring current and future clients. After all, we now have a new generation who desperately need to better understand how they can manage their finances for their family’s future, and a 20-page pension report will not be the answer.
Great privilege
The new breed of asset managers must take the best of their current world and develop the next, while still being proud of a laudable history.
And above all, they must remember that in whatever age and with whatever technology is used, it is a great privilege to be asked to care for these monies and that it is the client’s money, not theirs.
In my view, there is a very bright future for those with the imagination to grasp it. They will be the ones I will applaud, while clearing out the stables of the rest.
Justin Urquhart Stewart is co-founder and head of corporate development at Seven Investment Management
