The majority of investment management leaders in Europe and the Middle East say the pace and extent of regulatory reform could do more harm than good to their industry and that smaller players could lose out to larger institutions which are better equipped to cope.
Out of 54 CEOs and finance directors KPMG found 70% felt this way, while 87% said the European industry needs to remain competitive and open to non-EU funds and managers.
This is seen as reinforcing industry concerns that tougher regulation is threatening Europe’s dominant position in the global investment management market.
Tom Brown, European head of investment management at KPMG, said: “The European industry’s competitiveness is under threat. Year-on-year sales of cross-border investment products, most notably to Asia, have increased, however the industry fears that regulatory headwinds could make it too onerous and costly to offer certain products, consequently minimising Europe’s status and growth prospects.”
He also warned that savers could suffer too. Consumer choice will be constrained if firms withdraw from the market or if fund managers become more restrained in their risk taking and product offerings. Moreover, increased red tape from tighter regulation could dissuade certain savers from taking up products, or exclude them entirely due to the costs of obtaining impartial advice.
KPMG’s research also found that 77% of investment managers recognise that financial advice to consumers across Europe needs to be improved.
“Looking ahead, people not only need to be educated about the importance of saving for retirement throughout their working lives but to receive better advice on managing their financial affairs,” said Brown. “Achieving bigger returns means taking on bigger risks, so it is crucial that people understand what they are getting into, what they could gain and equally what they could lose.”
The top priorities identified by surveyed investment managers were pursuing growth through successful transactions and addressing risk throughout the organisation.
©2011 funds europe