Solutions for MIFID II: Show me the value!

The regulator wants asset managers to define more clearly the value they provide to their investors. In this session, Square Mile explores what they need to consider. The concept of a value assessment emerged from the FCA Asset Management Market study in 2018: this proposed certain changes to the structure of open-ended funds, including the appointment of a minimum of two independent directors (making up at least 25% of the board). It also stated that fund managers should start to provide an annual assessment on ‘value’ to this newly independent board. Since that point, there has been considerable debate on how ‘value’ should be defined. In January/ February 2019 Square Mile and Boring Money conducted market research with the aim to provide asset managers with an independent third-party view on how to assess and measure value. We asked consumers, advisers, investment trust directors, the regulator, service providers and academics for their version of value. The FCA already has its version. It defined seven elements in its non-exhaustive list: quality of service, performance, general fund manager costs, economies of scale, comparable market rates, comparable services and classes of units. In our discussions with the FCA, we found that there were also a number of key questions that the FCA wanted asset managers to think about from the clients’ perspective: · What do I get charged? · Can I see what I pay for? · What simple indicator do I have that will tell me what this fund is trying to do and what it will achieve? · What are the upsides and downsides? · Am I paying more for a choice that I’ve made and when I’ve made that choice can I understand it?