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Profile: Magnus Spence - there are conflicts of interest everywhere you look

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by Elsa Buchanan on Mar 10, 2014 at 09:48

Yet, he says going too far in that direction (‘it is illogical that the size of your research budget should be determined by how much you turnover in your fund’) could be dangerous, and could run the risk of discriminating against smaller firms, which rely on external research.

‘If you can get those principles right, they can address so many of the very inherent conflicts of interest that exist in our industry, because everywhere you look there are conflicts of interest,’ he says.

Speaking as the managing partner of a boutique, Spence believes the LLP model is ‘less likely’ to have such a conflict, which he says is a reason DSP has maintained its structure.

As the NCI chairman, there are a number of issues he believes are important to draw the industry’s attention to. The most significant to date is regulation. While he recognises the need for regulation, he believes ‘too much of it is a hindrance’.

UK members of the NCI spend between 15% and 25% of their time tackling regulation, Spencer says. ‘I recognise that the public at large is not interested in us pleading, which is fine, but I do think the people who have a vested interest in the City need to pay attention. Wave after wave of regulation affects everybody and the smaller firms disproportionately.’

Elsewhere, he is continuing to fight against HM Revenue & Customs’ plans to increase the taxation of limited liability partnerships (LLP). Spence believes the legislation, as currently drafted, could have adverse effects on the wealth management industry.

‘LLPs are a good concept because it is all about putting your capital in your business and having flexible structures. Is it really worth putting at risk the structure of choice of small asset management firms to raise £1 billion? You’re slashing choice for consumers, performance and partners control,’ he says.

The effects have already been felt at the NCI. Half of its 30 UK members are structured as LLPs and ‘seven are thinking about it, or have already incorporated’.

Spence adds: ‘Fewer boutiques being set up is not good for either the consumer, because he ends up having less choice, or the small and medium enterprises that employ 53% of the people in the financial sector.’

On that note, he insists the pendulum has undeniably swung. ‘I think the mood has shifted significantly enough for us to come out and talk about these points, without having everyone else telling us to bugger off,’ he says.

‘It’s about time we saw a shift away from consolidation back towards fragmentation, primarily for the consumer to have a better outcome.’

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