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Has FSA made the outsourcing market less saucy?

by Dylan Lobo on Oct 12, 2012 at 11:45

Has FSA made the outsourcing market less saucy?

You will be hard pressed to find a more competitive field in financial services than the outsourcing market at the moment.

The retail distribution review has opened a whole new channel of opportunity for discretionary managers as regulatory-burdened advisers outsource investment.

Last week the Financial Services Authority (FSA) sought to clean the playing field up by banning discretionaries from dangling juicy kickbacks in front of advisers.

The City watchdog must have smelled something rotten to issue the ban - which firms have been cheeky enough to tout for business in such a non-transparent manner in the stiffer regulatory climate?

Wealth Manager spoke to a number of senior figures in the industry who stressed there was nothing untoward at their practices, while wondering whether the FSA is making a fuss about nothing.

Standard Life Wealth director and head of strategy David Tiller told us: ‘[I don’t think] it’s a common practice – or at least it isn’t any longer. Most of the big firms have put a lot of resources into ensuring their propositions are compliant.’

However, he did suggest this could be an issue for some of the industry’s smaller firms. ‘There is a very broad eco-system of companies in the sector, so maybe this is how some smaller companies hope to win business,’ Tiller suggested.

Meanwhile Brooks Macdonald founder Chris Macdonald said the ban would make little difference to his firm’s prospects. ‘The way we have to report fees to advisers is completely transparent and has been since 1991,’ he said.

Others such as Quilter director Pamela Reid feels the FSA could have acted a little earlier, with RDR set to come in at the end of the year. ‘It would have been very helpful to have had this three months ago, but from our point of view we are prepared,' Reid said. ‘It is not a surprise and we are not going to have to make any amendments from what we have in place.’

This may be the luxury the likes of Quilter, Standard Life Wealth and Brooks Macdonald can afford. But perhaps for smaller firms desperate to get some kind of edge on the big boys, things could be about to get a little tougher.

* For the full story and detailed analysis see this week's issue of Wealth Manager magazine

2 comments so far. Why not have your say?

John Dance

Oct 12, 2012 at 14:56

Quote: ‘There is a very broad eco-system of companies in the sector, so maybe this is how some smaller companies hope to win business,"

Really? I imagine that one of the reasons most smaller discretionaries like ourselves were set up to avoid the unethical practices the cash rich 'heavy-weights' partake in, such as kickbacks and worse.

It really is amusing that these bigger firms are using every opportunity possible as a stick to beat the smaller firms with. The reality is that they are running scared and so they should be!

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David Cowell

Oct 12, 2012 at 15:04

Good on yer, John!

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