Fund Management

APCIMS Boss Says Private Client Firms Swamped by Regulation

Contributing Editor, 2 June 2005


UK private client investment managers and stockbrokers are swamped by too much regulation, which is potentially counterproductive to their r...

UK private client investment managers and stockbrokers are swamped by too much regulation, which is potentially counterproductive to their relationship with their clients, according to Angela Knight, chief executive of the Association of Private Client Investment Managers and Stockbrokers.

Ms Knight said a whole raft of regulation and the costs of implementing them are threatening the existence of some firms. “It is not a question of size, all firms are feeling the pressure,” Ms Knight told WealthBriefing.

APCIMS has recently flagged up concerns about the European Union’s Capital Requirements Directive, the standards in which it believes are designed for international banks, not UK-based private client brokers and investment managers.

“Clearly our investment firms need to be confident in what they are implementing, bearing in mind that they come from a different background to banks, and are trying to get to grips with the many other priorities facing them at present,” said Ms Knight.

Also of concern is EU Investment Services Directive, now referred to as MiFID (the Markets in Financial Instruments Directive), which is due to come into force in 2006. “This provides a whole list of new regulatory requirements—daunting to every one of our members,” said Ms Knight.

Concern has also been expressed over fee increases from the UK financial regulator, the Financial Services Authority, in order to pay for more anticipated failures in mortgage endowment policies and precipice bonds, and split capital investment trusts.

“The FSA is incorrectly categorising our member firms, putting them together with those who operate in a wholly different sector of the market. The result is that private client firms are being ordered to pay compensation for failures within areas of the market in which they do not operate,” said Ms Knight.

The APCIMS boss said that greater regulation will lead to a further surge in outsourcing, as firms attempt to keep cost pressures under control.

“Full-service brokerages are going to be wiped out,” said Ms Knight. “It’s now all about wealth management.”

Ms Knight also said that traditional equity-based private client stock broking is coming under considerable pressure from alternative investments such as spread betting and contract for difference trading, both of which have tax advantages.

“They are taking an increasing amount of trade away from traditional equity trading.”

Ms Knight fears that UK private client investment managers and stockbrokers face higher costs, than many of their competitors in Europe.

“Differential costs will become more of an issue for many firms in the next few years—this will place added pressure on them.”

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