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Today New City Initiative is comprised of 43 leading independent asset management firms from the UK and the Continent, managing approximately £500 billion and employing several thousand people.

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2018: Key Considerations for NCI Members

Published by Charles Gubert

2018: Key Considerations for NCI Members

Mathematical economist Irving Fisher once confidently assured his followers that prosperity would be in a perpetual state, arguing that the stock market had reached “what looks like a permanently high plateau.” The only issue was that he made those comments in 1929 and three days later the stock market nosedived leading to the Great Depression. In short, making predictions is not for the faint-hearted, but New City Initiative (NCI) will have a go, looking at some of the key regulatory trends likely to impact asset management in 2018.


MiFID II will be EU-wide law on January 3, 2018, one year later than its original implementation date. For NCI members, MiFID II will introduce significant change, most notably in their ability to source sell-side research. Inducement bans mean research cannot simply be given to managers in exchange for equity commissions. Instead, the cost of research needs to be unbundled and managers must pay for it out of their own pocket.

Larger fund houses have confirmed they will pay for research out of their P&L, but smaller firms are likely to face more serious cost pressures. Most NCI members and asset managers generally are either paying for research directly out of their P&L; increasing management fees, or establishing separately funded research payment accounts (RPAs) in order to keep accessing sell-side research.


GDPR imposes strict standards on data governance and protections across EU-wide companies including investment funds. Breaches of GDPR will lead to significant fines, and potential reputational damage and even client redemptions. Firms need to be preparing for the rules, identifying the location of any client data that they possess, in addition to obtaining consent from clients if customer data is used for purposes of analytics, distribution to third parties and marketing.

GDPR also lays out a framework for organisations to report data breaches, and requires firms with more than 250 people to appoint a chief data officer. For asset managers, GDPR needs to be a business priority in 2018.


The Senior Managers & Certification Regime (SMCR) has been bedded down for more than a year now, although it currently applies only to banks and PRA regulated financial institutions. It will, however, be extended to asset managers in 2018. Its core demands are fairly uncontroversial with a number of organisations welcoming the regulation. Put simply, SMCR introduces prescribed responsibilities for senior managers, and subjects them to greater accountability when rules are breached.

David McNair Scott, CEO at Trailight, highlighted the biggest SMCR challenge for buy-side firms was around allocating responsibilities and functions to designated persons within an organisation. He added a number of asset managers had yet to systematise and document their SMCR processes, something which can be quite painstaking. McNair Scott also acknowledged that most of the contents of SMCR were proportionate and the FCA had sought to curtail any destabilising impacts on smaller managers.

AMMS Consequences will be felt

SMCR is only one part of the FCA’s efforts to heighten standards in asset management. The FCA’s AMMS was released in June 2017, and it was a report many in the industry considered to be fairly even-handed. Most significantly, the industry is not staring down at a Competition and Markets Authority (CMA) probe unlike the investment consultants. Overall, the AMMS is likely to bring about tougher standards and greater competitiveness in asset management.

One of the proposals being put forward is to require managers to independently assess whether they deliver value for money to clients, a process which will be overseen by an impartial board of directors who are all subject to the SMCR. This recommendation is a regulatory reaction to concerns that retail investors sometimes struggled to understand precisely what the objectives of their managers were.

The AMMS also led to the creation of the Institutional Disclosure Working Group (IDWG), a body looking at formulating a template to be provided to investors about cost disclosures across different segments of asset management. Anecdotal reports suggest the template will be detailed, which may be a problem for smaller asset managers, although many will probably outsource data aggregation to third party vendors. Creating a framework for transparency and competitiveness is certainly not a bad thing for asset management during this period of Brexit uncertainty.

And finally Brexit…..

At the time of writing, nearly all newspapers appear to give the impression that Brexit negotiations are finally making progress, as the UK confirmed a willingness to pay a substantial divorce bill to the EU. NCI members have repeatedly urged there be a transitional arrangement in place to enable its constituents and their clients to manage Brexit risk in a calm and composed manner.

A cliff-edge Brexit would be devastating for asset managers, leading to rushed decision-making, potential redemptions and possible relocations. NCI urges the government and the EU to minimise any instability in financial services that may come about through Brexit.