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3. Te industry must be proactive in nancial sector policy debates

(domestic and EU). Policyma kers should consult more with

the industry on matters involving the nancial sector at large,

particularly on market issues.

Location choice and competitiveness

Te UK remains a good place to locate an asset managementbusiness. Nevertheless, challenges and opportunities emerge

continually. European legislation is a key actor in determining the

competitive landscape, and government and industry need to work

to secure advantageous outcomes in Brussels.

Recommendations

1. Te Group suggested that the asset management industry and

government should work together to prevent urther loss o

UK und business to other jurisdictions and to make the UK a

domicile o choice or collective schemes.

2. Te UCIS IV Directive, combined with the simplication o

the UK tax regime or oshore unds, would bring greater scope

or rationalising und ranges. However, the UK must not be

placed at an unnecessary disadvantage in this process.

3. Consideration should be given to expanding the class o

collective investments that the Financial Services Authority

is empowered to authorise and to making changes to the FSA

rules or Qualied Investor Schemes.

Distribution and the consumerMany savers and investors are unamiliar with the intricacies o

nancial markets and look to advisers thereore or help. However,

there can be a lack o simplicity o choice and transparency in the

help that they receive. Te report suggests that ve principles be

adhered to in relation to distribution:

1. promotion o choice o distribution channels;

2. transparency and clarity surrounding adviser status;

Asset management: the UK as a globalcentre

February 2010

In November 2009, the Asset Management

Working Group published its report on the UK

asset management industry, entitledAsset

management: the UK as global centre1. The Group

was established by the Treasury to report on

the UKs asset management industry and to

identiy, among other things, opportunities orits development. Members o the Group included

Helena Morrissey, chie executive o Newton

Investment Management.

In this brie paper, we review the key fndings and

recommendations (to the industry, regulator and

government) in the report.

Findings and recommendations

The role o the asset management industry

Te UK is home to a leading global asset management industry.

Te industry serves the interests o a broad range o clients and also

ulls wider economic roles. It is the principal source o investment

capital or UK companies and it provides the liquidity which

underpins global capital markets that are located in the UK. Asset

management rms provide checks and balances within a regulated

ree market and, as agents or shareholders, those rms provide

challenge and eedback to the corporate community.

Recommendations

1. Te asset management industry should ensure that meeting

clients requirements remains at the heart o its operating

philosophy. Tis should include shaping more eectively client

expectations o what it can and can not deliver.

2. Engagement by shareholders should be encouraged by both

industry and regulator.

1 Crown copyright. Te ull document can be obtained atwww.hm-treasury.gov.uk/d/n_assetmanagement_091109.pd


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The importance o pensions and savings

Te industrys strength today derives in signicant measure rom

the legacy o a large and growing pool o domestic pensions and

savings. Tis has driven scale, multi-asset class skill and cutting

edge innovation. A thriving domestic market in the uture can

only help to sustain the industrys momentum and to capitalise on

the expanding pool o global pensions and savings, which will be a

major source o resh opportunity.

A major change in domestic pension provision planned or 2012 is

likely to drive a signicant expansion o pension saving, particularlythrough dened contribution (DC) schemes, in the UK. Te asset

management industry will play a ar more visible role in the nations

savings provision. However, considerable challenges remain. Te

exposure o millions o people to investment products through their

pension savings will require a new ocus by the industry on product

design, particularly deault unds in DC schemes. At the same time,

although substantial incentives are already available through the tax

system to oster pension saving , these need to combine simplicity

with a stable environment in which to encourage condence, and

with airness and aordability.

Recommendations

1. Industry and government should work together to ensure open

and air access to overseas markets or the asset management

industry.

2. Te industry should work to ensure that retirement products,

particularly the deault unds within pension vehicles, are

comprehensible and designed to address the requirements o

savers.

3. Savings incentives, or both pension contributions and or long-term saving more generally, should aim or simplicity, long-term

stability, airness and aordability.

4. Te number o dierent tax wrappers should be kept to a

minimum in the interests o simplicity. It should not be

necessary or und management rms to wrap pension products

in lie insurance wrappers, and means should be explored to

extend the same benets to simple unds as are enjoyed by lie

products.

3. transparency in remuneration;

4. enhancement o adviser proessionalism and empowerment o

consumers; and

5. a level playing eld or dierent products and dierent

distribution channels.

Tere is a substantial and growing opportunity or UK asset

managers to distribute investment products within a single

European market. Te shape o the market in much o Continental

Europe is dierent rom the UK, with a preponderance o sales

taking place via commercial banks. For the European consumer tobenet ully rom enhanced competition, it is important that there

is depth and breadth o quality in distribution and advice.

Recommendations

1. Te ve principles above should be adopted as part o a

proactive agenda, both in the UK and within the EU.

2. Policy should aim to create across Europe a level playing

eld or advice, which does not discriminate unduly between

dierent advice and distribution models.

3. Tere should be clarity or European consumers about the

status o advisers and the nature o the advice consumers

receive. Disclosure needs to have a strong and transparent role

in the distribution process and must not be relegated to the

status o administration.

4. Te cost o advice should be distinguished rom the cost o the

products. A dierentiation between product pricing and the

cost o advice is preerable or consumers.

5. Tere should be a tiered system o qualications or advisers in

a way that requires those advising on more complex products to

have higher levels o qualications and continuing education.Te development o web-based tools or consumers should be

acilitated.

6. Standards o disclosure o product eatures and other aspects o

advice should be raised to the level o best existing practice in

an equivalent way or all investment products, including unds,

unit-linked insurance products, certicates and structured

banking products. Similar principles should apply to debt

products.


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3. All avenues to maintaining market liquidity and efciency

should be promoted and protected. Unless evidence shows

that restrictions are necessary or market stability, regulators

should avoid imposing investment restrictions which could have

substantial adverse consequences or the eective operation o

markets.

4. Te main ocus o nancial accounts should be on investors.

Te interests o shareholders and regulators in this area are

potentially dierent and this should be recognised.

5. Te government should seek reorm o current institutional

and legislative structures in the EU which tend to exclude

investment management rms rom the pension environment.

Capital market structures

Financial markets are or investors and capital raisers, not or

intermediaries; this should be a guiding principle or regulating

markets. Tis means that the asset management industry has not

only a legitimate interest in the structure o nancial markets but

also a duty to challenge and shape markets where they do not

work in the best interests o end investors. Te Group supportedthe work that HM reasury and the European Commission are

carrying out to bring better investor protection into UK market

arrangements.

Te asset management industry has a vested interest in a soundly

unctioning banking system in which investors have condence.

Tere is no sell side (investment banks) without the buy side

(asset management rms). Equally, the buy side will not be a success

unless the sell side is successul.

Recommendations

1. Capital markets exist or the benet o issuers and investors.

Tis gives the investment management industry a legitimate

interest in all aspects o capital markets and the banking system.

Te industry needs to articulate its positions better and more

emphasis should be given to the interests o investors and

capital raisers when regulating markets.

2. Tere is a need to ensure continuity in the operation o capital

markets and the banking system as a whole, irrespective o what

happens to individual institutions.

The ull report o the Asset Management Working Group can be obtained at www.hm-treasury.gov.uk/d/n_assetmanagement_091109.pd

In the UK, this document is issued by Newton Investment Management Limited, The Bank o New York Mellon Centre, 160 Queen Victoria Street, London EC4V 4LA. Registered inEngland No 1371973. Newton Investment Management Limited is authorised and regulated by the Financial Services Authority. In the UK, the opinions expressed in this article are those o

Newton Investment Management and should not be construed as investment advice.www.newton.co.uk

In the US, this document is issued by Newton capital Management Limited. The opinions expressed in this presentation are those o Newton Capital Management Limited and shouldnot be construed as investment advice. Newton reers to the ollowing group o aliated companies: Newton Investment Management Limited, Newton Capital Management Limited,Newton International Investment Management Limited, Newton Capital Management LLC and Newton Fund Managers (CI) Limited. Except or Newton Capital Management LLC andNewton Capital Management Limited, none o the other Newton companies ofer services in the U.S.. Newton Capital Management Limited is an investment management rm authorizedand regulated in the United Kingdom by the Financial Services Authority in the conduct o investment business and is a wholly owned subsidiary o The Bank o New York MellonCorporation. Registered in England no: 2675952. Newton Capital Management Limited is registered in the United States as an investment adviser under the Investment Advisers Act o1940. Newton Capital Management LLC provides marketing services in the U.S. or Newton Capital Management Limited.Tel: (516) 338 3521www.newtoncapitalmanagement.com

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