Wealth Manager - the site for professional investment managers

Register for full access to Citywire’s Fund Manager database, news and analysis. Registration is free and only takes a minute.

NCI: KIIDs are 'waste of time', let's create a code of practice

1 comment
NCI: KIIDs are 'waste of time', let's create a code of practice

The New City Initiative (NCI) has called for the creation of an industry code of practice.

The think-tank comprising private asset management companies said the framework could focus on principles of transparency and alignment. 

This would include the ability to demonstrate firms are investing in their own funds, have suitable charging structures and levels of stewardship and are long-term investors. This would be coupled with accountability to clients, shareholders and government.

The NCI’s chairman, former Wealth Manager cover star Magnus Spence (pictured), explained the plan would be to provide a ‘stamp of approval’, which covers a set of values that are ‘more than the minimum prescribed by regulation’.

‘While there are more codes of practice around than hot dinners, we want one that means investors can be comfortable that what they are getting is valuable,’ he said. ‘Key Investor Information Documents (KIIDs) are a complete waste of time, and I don’t think they help investors at all.

‘But if you had on the KIID document a stamp of approval, which read ‘compliant with the NCI code of practice’, might that give investors additional comfort?’

Spence cited the difficulty to pin details down as a barrier to implementation, but told Wealth Manager a scoring system could help NCI members sign up to the framework.

‘They all like the principle but the challenge is in the detail and the way that you are aligned with the investor.

The code, which can be a statement of 10 principles that fits on one A4 piece of paper. [It] will have guidance notes that could explain each particular case and recognises that trading activity around positions needs to be a reflection of requirements of your individual clients, for example.’

He added: ‘A lot of people say that if you are a long term investor, you should have a low turnover – but if you are a small firm you need to be able to have shorter term trading to cut losses when prices fall.

'You have to recognise that there are these inconsistencies and that each small or big boutique firm wrestles with those.'

The NCI chairman hinted the principles could be set up as a living document, which could also reflect the changes in the industry including debates around risk assessment or dealing commission to buy research.

This comes less than a year after two wealth managers joined forces to create a framework to estimate the total costs of running discretionary portfolios.

Following a Wealth Manager article on the topic in 2012, Rathbones and Quilter Cheviot decided to engage in discussions to compare their methods of calculation.

The duo put together an approach (click here for full details) that expressed total costs as an annual percentage in a similar vein to the ongoing charges figure for collectives.

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 Investment Pulse: the highs and lows of 2014

Investment Pulse: the highs and lows of 2014

This week's Investment Pulse looks back at some of the biggest stories of the year as well as looking forward to 2015.

Play Inside ETFs: Why the US bull-run still has legs

Inside ETFs: Why the US bull-run still has legs

Global equities suffered a sharp sell-off in the third quarter but exchange traded fund investors are continuing to back the US to outperform in 2015

Play Paul Niven: I won't rip up the Foreign & Colonial Trust history book

Paul Niven: I won't rip up the Foreign & Colonial Trust history book

The newly appointed manager of the Foreign & Colonial trust talks about his plans for UK's oldest investment company.

Your Business: Cover Star Club

Manchester wealth firm hires Coutts director for London launch

Manchester wealth firm hires Coutts director for London launch

Former Coutts director Tony Robinson has joined Chartered Wealth Management to head the company’s newly opened London office.

Wealth Manager on Twitter