Godfrey: UK asset management still “pretty dysfunctional”

One year ago, UK Investment Association (IA) chief executive Daniel Godfrey was ejected from his post after member firms M&G and Schroders threatened to resign, and Aberdeen Asset Management, Fidelity and Invesco Perpetual announced their involvement with the body was under review.

His three years at the IA had been typified by controversy, culminating in his attempt to establish a ‘Statement of Principles’ for member firms.  The rules overall were unpopular, attracting just 25 signatories out of 200 members in six months. Disagreement was said to stem from the increased compliance burden necessitated by certain principles.

Speaking to Funds Europe on the anniversary of his ouster, Godfrey says his departure resulted from his failure to execute a strategy agreed upon by the IA’s board.

“I regret I wasn’t successful in that mission, but I can continue it outside the IA,” he says.

Since leaving, Godfrey has pursued his strategy in a number of ways. For instance, in May he joined the Financial Conduct Authority on a short-term basis, consulting with the organisation’s asset management team on policy.

While unable to talk about the specific areas on which he advised, Godfrey has remained outspoken about the need for asset managers to reform internal policies on remuneration, fee transparency and incentive structures – and later that month, it was announced he was in discussions with ShareAction chief executive Catherine Howarth on these issues.

“The asset management industry in the UK is hugely important, but it’s pretty dysfunctional. There’s a long way to go before it becomes a force for good. It can’t carry on as it has been,” he says.

“Firms need to be clear with investors about what they’re trying to do and are doing – and they need to make profits purely for their customers.”

He is also in the process of establishing an investment trust with a unique structure – shareholders will not govern it, and staff will be paid a fixed annual fee, without the prospect of bonuses.

Full details and a launch date are “coming soon”, but the trust’s investment strategy is already certain – Godfrey says managers will invest for the long-term, sitting back and allowing time and compound interest to “do their magic”.

The IA has been active over the past year, launching initiatives such as the Productivity Action Plan, and creating a working group on cost disclosure. In April, former City lobbyist Chris Cummings was named chief executive officer.

In July, it published a report on the benefits that asset management has for investors and the UK economy – though it stepped back from answering critics of active management.

The next month, the IA issued a study that concluded there was no evidence for ‘hidden’ fund fees. Critics argue these fees negatively affect returns.

Godfrey’s ‘Statement of Principles’ remains in place but was amended to make rules non-binding and its signatories anonymous.

On the IA’s activities since his departure, Godfrey says what the trade body does or doesn’t do is no longer his concern.

©2016 funds europe