Wealth Manager - the site for professional investment managers

Register to get unlimited access to all of Citywire’s Fund Manager database. Registration is free and only takes a minute.

Are underqualified CF30s the biggest risk to your business?

Are underqualified CF30s the biggest risk to your business?

Underqualified CF30s and decentralised investment functions are two of the biggest headwinds facing wealth management businesses, according to London & Capital (L&C) managing director Daniel Freedman.

Freedman (pictured) argues the professional requirements for those with CF30 regulatory permissions are too low. According to the FCA there is in fact no minimum professional standard for those with CF30s, although this can vary from role to role dependent on the scope of their responsibilities.

Combined with a lack of supervision, he is concerned that having no real benchmark requirement could mean the ramifications are profound.

‘The problem is that if you are not fully qualified, don’t have the right background and are not organised with a proper chief investment officer commanding the ship, the risk in your business increases dramatically when you’ve got various unqualified people picking stocks,’ he explained. ‘The qualification to be a CF30 for running portfolios is too low. These people have to be more highly qualified to make investment decisions.’

While Freedman acknowledges this isn’t purely a regulatory issue, he believes the FCA should provide clearer guidelines about what responsibilities individuals can take when it comes to decisions for client portfolios.

Freedman’s observation comes after an unsuccessful six months spent interviewing CF30s to join the company.

‘We can’t find people that have high enough qualification in terms of their experience and the exam qualifications to fit the role of an actual portfolio manager. I had interviews with young guys, a couple of years out of college who are currently managing large sums of money and entire portfolios. I took none on.’

As part of L&C’s strategy to enhance its service it has introduced a ‘front office project’, set up with the help of former CIO Ashok Shah to improve the client experience and compliance team.

Over the last 18 months the compliance team has increased from one to four and the focus has been on training staff so that they really understand the importance of risk profiling.

‘We’ve also changed the way the portfolio is set up for the client, more orientated towards risk, volatility, weighted returns.’

London & Capital’s assets under management comprise £2.4 billion in the private client arm, with £600 million in its real estate division.

Over the last 12 months, the firm added £500 million of net new assets and Freedman anticipates a similar figure 2014, partly driven by growth among international families.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play Volatility spike: How ETFs can soften the blow

Volatility spike: How ETFs can soften the blow

ETFGI’s Deborah Fuhr discusses the role of ETFs in client portfolios during volatile market conditions

Play Winter market warmers, the post QE world and timing the FED

Winter market warmers, the post QE world and timing the FED

This week’s episode of Investment Pulse looks at the winding down of quantitative easing, whether to try and time a Federal Reserve rate rise and if strong seasonal performers can reverse recent market slumps

Play JPM’s Negyal: Back divis to temper EM volatility

JPM’s Negyal: Back divis to temper EM volatility

Omar Negyal, co-manager of the JPMorgan Global Emerging Markets Income trust, says a dividend approach to emerging markets reduces the volatility of investing in the asset class.

Wealth Manager on Twitter