A financial watchdog vowed to launch a probe into conflicts of interest and overcharging in the UK’s £5.4trillion money management industry next month.
Martin Wheatley, chief executive of the Financial Conduct Authority (FCA), said the watchdog will launch a consultation paper in November to “clarify rules on research, including guidance around corporate access” as well as conduct a review looking at “conflicts of interest within asset management”.
In a speech to representatives of the industry in London yesterday, Mr Wheatley said investors, mainly pension and insurance funds, paid asset managers up to £500million a year for “corporate access”.
Mr Wheatley said: “This averaged out to each individual investment manager paying over £100,000 just to gain access to the management of companies they wanted to invest in.”
Mr Wheatley will consult with asset managers from November to see what changes are needed to rules on research that have been in place since 2006, or just before the 2007-09 financial crisis put an emphasis on transparency in financial services.
He said: “The system is not quite working the way it was originally designed.
“We need to look again. We need wider reform to address the flaws that cannot be addressed by incremental improvements to the existing rules.”
Daniel Godfrey, chief executive of the Investment Management Association, a trade body, said it will publish its own review early in 2014.
The investigation will affect Scottish money managers. The biggest include Aberdeen Asset Management (AAM), which manages investments worth £201.7billion, and Scottish Widows Investment Partnership (Swip). Last week AAM said it was in talks to acquire Swip from Lloyds Banking Group.