Sheila Nicoll, who leaves the UK’s Investment Management Association to the join a regulator, tells Nick Fitzpatrick
that industry relations with Europe have entered a new and better era
The lobbying efforts of the European asset management industry in the past two decades were, for much of it, weak in comparison to the efforts of the banking and insurance industries. Tellingly, on a European level, the European Commission did not originally have an asset management section within its DG Markt unit, which coordinates Europe’s single market policy; yet other financial institutions always had a place at the table.
Consequently asset managers were not represented in the first drafts of Mifid – the Market in Financial Instruments Directive that updates conduct of business rules.
Sheila Nicoll, the outgoing deputy chief executive of the Investment Management Association (IMA), the UK trade body, says: “Asset managers were not considered and so it wasn’t clear how best execution [a key Mifid topic] related to them. So we rang the Commission about this, but you just got the sense that they didn’t even know what asset management was.”
All this has now changed. Not only is asset management catered for within DG Markt, but managers are now covered by Mifid – for better or worse. But perhaps the best indicator of change is seen through Ucits, the rules around fund products.
According to Nicoll: “In the old days Ucits was where people in Brussels wanted to work out their retirement. But now it’s seen as a much more sexy subject.”
Nicoll, who is due this month to become director of the retail firms division within the Financial Services Authority (FSA), the UK regulator, believes that the IMA has been the key protagonist in changing the profile of asset management at a European level. And not just the profile of UK managers, but of their European counterparts too.
“The greatest achievement that we’ve had since I’ve been at the IMA is our work with the EC, particularly over the last five years. We’ve been consistent in our message, we’ve always provided justification for our stance, and we have stuck together.”
It was around five years ago when the IMA started to increase its links and influence in Europe. “We were sensing from a lot of members that the Ucits Directive was really kicking in and people were seeing good market opportunities arising from it. Threadneedle launched the first UK Oeic [open-ended investment company] and used it to enter the pan-European market.
“Ucits shifted our focus and made us realise we were not just representing UK funds, but also managers that were using Dublin and Luxembourg as their centres.” Nicoll adds: “We wanted to really work with the Ucits Directive to overcome the barriers on cross-border business.”
This led the IMA to commission a report in 2003 which found that a single European market in asset management – which Ucits aims for – would bring economic benefits of at least e5bn a year.
“We built on this report and costed specific issues within it. We costed the losses that result from having different fund registration requirements in each European member state, and we went to the EC and said, ‘Here you are!’”
Fortuitously, this took place when the EC was nearing the end of its Financial Services Action Plan, leaving a window of opportunity to raise the profile of asset management.
The Heinemann Report contained proposals for cross-border fund mergers and an end to fund registration in multiple jurisdictions. These proposals still reverberate today and the IMA’s preferred model for the Ucits landscape has found a lot of support, but has still not been implemented fully.
Says Nicoll: “The timescales are frustrating, but they are better than they used to be. Five years is not a long time in Europe.”
She adds: “But we have arrived at a new era in working with Europe. Nowadays, rather than just dream up a proposal in Brussels, they will consult with the industry. The timescales may be frustrating, but we don’t want to discourage them from consulting.”
In 1992, after ten years at the London Stock Exchange, Nicoll became director of legal, fiscal and regulatory affairs at Autif (the Association of Unit Trusts and Investment Funds). In 2001 she became deputy director general.
Autif merged with the Fund Managers’ Association in 2002 and Nicoll moved into the same role within the merged body, the IMA.
Nicoll remembers the merger, which caused controversy as retail managers wondered how they would fit with institutional managers, and vice versa. These rivalries still appear to exist. At an IMA dinner last year one institutional manager sneered that the event was “full of IFAs”, referring to the UK’s retail advisers.
Nicoll said: “The retail side got the benefit of the clout that the larger funds under management of the institutional businesses offered. By merging we also got more senior people and we were able to step up our representation and activities.”
The timing of the merger was fortunate as the investment management industry was being put under the spotlight like never before. Paul Myners, the former head of Gartmore, was carrying out a far-reaching review of institutional asset management in the UK.
Now that she is off to the FSA, many will ask if Nicoll is crossing to the ‘dark side’, or if she will continue to wave the flag for asset management.
“What’s been great about working at the IMA is that it represents an industry I can believe in. I genuinely believe in the product.
“We may complain about the FSA but they are very good. They listen. I feel I’m bringing an industry knowledge to the FSA and it speaks well for them that they will pay me a non-civil servant salary!”
© fe September 2007