UK asset managers told to show they offer value for money

LONDON (Reuters) – Asset managers must assess each year how much value for money they offer investors, Britain’s markets watchdog said on Thursday, stopping short of tougher measures called for by critics of the 8 trillion pound ($ 11 trillion) sector.

FILE PHOTO: The Canary Wharf financial district is seen from Greenwich Park in London, Britain, January 22, 2017. REUTERS/Hannah McKay

The Financial Conduct Authority (FCA) said asset managers would have 18 months to prepare for a requirement from September 2019 to make an annual assessment of value, as part of their duty to act in the best interests of investors.

In a requirement that will take effect six months later than originally indicated, asset managers will have to publish their value assessments and show if any corrective action was taken if charges were identified as not being justified.

After pressure from industry, the value for money idea floated in last year’s review has been broadened to overall value to avoid what the FCA says is too much focus on costs.

“Changes to focus on wider value, rather than just charges, will better enable firms to demonstrate this value to their customers, although the new public statements could risk overloading consumers with information,” said Andrew Strange, a director at consultants PwC.

There is no common template for managers to assess value, they are only asked to spell out the factors taken into consideration such as the range and quality of services provided and the performance of the fund after deduction of all payments.

Fund managers will also have to appoint at least two independent directors to their boards by September 2019.

Shares in leading asset managers outpaced gains in the broader stock market, with Schroders (SDR.L) up 1.7 percent and Standard Life Aberdeen (SLA.L) up 2 percent at 1031 GMT.

The sector’s main UK trade body the Investment Association welcomed recognition by the FCA that investors judge asset managers by performance and service, as well as cost.

But Gina Miller, founding partner of investment firm SCM Direct, said it was shocking how long it had taken the FCA to “achieve nothing more than restating the obvious”, without tackling “misleading fees”.

SWEEPING REVIEW

The reforms build on the watchdog’s sweeping review of Britain’s asset management sector published last June that found evidence of weak price competition.

The FCA also launched a further consultation on remedies related to funds providing better information about their products, covering how fund objectives can be expressed more clearly, and benchmarks used for tracking performance.

This would make life harder for so-called “closet trackers”, or funds which say misleadingly they actively chose investments and therefore charge higher fees. Tracker funds which follow a benchmark, such as the FTSE 100 index, charge lower fees.

PwC’s Strange said the proposals would force managers to be even more vigilant in how they use benchmarks in marketing materials and show fund performance when no benchmarks are used.

The FCA said the chair of an asset management firm’s board will be directly accountable to regulators for assessing value for money and ensuring independent directors are appointed.

Asset managers will have a year to comply with changes to how they profit from investors buying and selling their funds, known as box profits, and with steps that make it easier for investors to shift into cheaper share classes, the FCA said.

Daniel Godfrey, the former CEO of the Investment Association who called for more transparency in the sector, said the changes should improve value for investors, and that the importance of forcing asset managers to be clearer on their use of benchmarks should not be underestimated.

Kevin Doran, chief investment officer at broker AJ Bell, said: “For far too long, many fund providers seem to have forgotten just whose money it is they manage, hiding behind vague objectives and excessive charges.”

Additional reporting by Sinead Cruise; Editing by Jane Merriman and David Holmes

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HSBC has worst gender pay gap among Britain's largest companies

LONDON (Reuters) – HSBC (HSBA.L), Europe’s largest bank, has reported the largest difference in male and female staff salaries among large organisations in Britain, as the government looks to pressure big companies to reduce gender pay disparities.

Swamped by the task of delivering Brexit, Prime Minister Theresa May is under pressure to make visible progress on a domestic agenda set out when she took power in July 2016, particularly after a snap election in 2017 that exposed a weakness on social reforms.

Hoping to highlight gender discrimination and force companies into action, May has implemented long-planned reforms ordering companies with 250 or more employees to publish details of the salary difference between male and female employees by Wednesday evening and report back annually on the pay gap.

HSBC on average paid men 59 percent more than women, the biggest difference among companies with more than 5,000 employees in Britain, according a Reuters analysis of the published data using the mean as the measure.

The next largest gender pay gaps were at Virgin Atlantic, where men received 58 percent more on average more than women, followed by a unit of Barclays (BARC.L), where female staff earned 48 percent less than male colleagues.

HSBC said it was confident in its approach to pay and made appropriate adjustments if it identified differences between men and women in similar roles which could not be explained by performance or experience.

Virgin Atlantic said the gap reflected the relatively low number of female pilots in the aviation industry, while Barclays said it had more work to do so women could progress in their careers at the company.

Firms are not required to break down the data in detail, leading to criticism that the average figures could obscure or exaggerate demographic explanations for disparities. Nevertheless, they offer a step forward in assessing the issue.

EQUALITY POLICIES

Almost 50 years since the passage of Britain’s equal pay act, the continued gulf in earnings between men and women has steadily risen up the political agenda. The opposition Labour Party first created powers on gender pay reporting in 2010, but then lost an election. May enacted those powers last year.

FILE PHOTO: People walk past a branch of HSBC bank in central London, Britain June 09, 2015. REUTERS/Neil Hall/File Photo

Although part of a broader trend of pro-equality policies in Britain, the issue has gained momentum under May, the country’s second ever female leader, and increasing competition from her main opponent, socialist campaigner Jeremy Corbyn.

May vowed in 2016 to tackle “burning injustices” in society, with a specific reference to gender pay alongside issues like race and class discrimination.

Nearly two years later, she said that by introducing the reporting requirement, her government had taken a lead on the issue.

“By making this information public, organisations will no longer have anywhere to hide,” she wrote in the Daily Telegraph newspaper. “Shareholders and customers will expect to see improvements, and will be able to hold organisations to account if they fail to achieve them.”

Other countries to introduce mandatory gender pay gap reporting include Australia, which passed similar legislation in 2012, and Germany.

Reuters analysed pay figures for 491 of the leading companies, government departments, charities, local authorities and hospital trusts, which employ more than 5,000 people.

Of those organisations that had published data by 3 p.m. (1400 GMT) on Wednesday, 97 percent pay men more than women and just 3 percent pay women the most.

The average gender pay gap among these largest companies is 15.5 percent, according to the Reuters analysis.

Political opponents, including Labour, welcomed publication of the data as a step forward but urged a more hands-on approach, saying the government still lacked clear plans on how to address the problems they had revealed.

“(Theresa May) wants to close the #paygap but says nowhere how she plans to do it. Politicians can’t just keep beating up business while leaving structural inequality untouched,” tweeted Sophie Walker, leader of the Women’s Equality Party.

Editing by Guy Faulconbridge and David Holmes

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UK house price growth unexpectedly slows to seven-month low – Nationwide

LONDON (Reuters) – House prices in Britain rose at the slowest pace in seven months in March, mortgage lender Nationwide said on Thursday, adding to signs of fading momentum in the market.

Houses are seen in London, Britain January 19, 2017. REUTERS/Stefan Wermuth

House prices rose 2.1 percent in the year to March, weaker than all forecasts in a Reuters poll of economists that had pointed to growth of 2.6 percent and slowing from a 2.2 percent increase in February.

Prices fell on the month by 0.2 percent, following a 0.4 percent drop in February – again undercutting all forecasts in the Reuters poll that had pointed to growth of 0.2 percent.

Britain’s housing market has been hit by a squeeze on household incomes caused by higher inflation after the Brexit vote in 2016 pushed down the value of the pound. Weak wage growth has added to the strain on many households while the overall economy has slowed.

“Housing market activity is expected to remain lacklustre as the extended squeeze on consumer purchasing power only gradually eases, confidence is fragile and appreciable caution persists over engaging in major transactions,” Howard Archer, economist at the EY ITEM Club, said.

“Potential house buyers also look highly likely to face further interest rate hikes over the coming months.”

Economists polled by Reuters expect the Bank of England to raise interest rates again in May to a new post-financial crisis high of 0.75 percent. [BOE/INT]

Nationwide said it expected house prices would be broadly flat over 2018, with a marginal gain of around 1 percent over the year as a whole.

Earlier this month, rival mortgage lender Halifax said house prices increased at their slowest annual pace in almost five years during February.

The Bank of England is due to publish mortgage approval and bank lending data for February at 0830 GMT.

Reporting by Andy Bruce; Editing by Susan Fenton

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UK consumers turn more confident in March – GfK

LONDON (Reuters) – Consumers in Britain were their most confident in 10 months in March, according to a survey which suggested that they took comfort from a fall in inflation and this month’s Brexit transition deal.

Shoppers browse for shoes during the Boxing Day sales at Selfridges in London, Britain December 26, 2017. REUTERS/Mary Turner

The headline gauge of consumer confidence, compiled by market research firm GfK for the European Commission, rose to -7 from -10 in February.

The median forecast in a Reuters poll of economists had pointed to another reading of -10.

“The prospect of wage rises finally outstripping declining inflation, high levels of employment with low-level interest rates, and finally some movement on the Brexit front appear to have boosted our spirits,” Joe Staton, head of experience innovation UK at GfK, said in a statement.

Prime Minister Theresa May this month secured an outline deal to keep Britain’s access to the European Union’s single market unchanged for 21 months after Brexit in March next year.

That political breakthrough was accompanied by economic data that showed a pickup in the pace of wage growth and inflation continuing its fall, having jumped after the Brexit vote.

However, GfK’s consumer confidence measure remained in negative territory, where it has been since early 2016, and another survey published on Thursday found households turned a bit more pessimistic in March.

Opinion polling firm YouGov said its index edged down one point to 107.7, the first fall since November, although households reported an improvement in their finances.

Separately on Thursday, the Confederation of British Industry, an employers group, said growth in Britain’s private sector slowed in the first three months of the year.

The survey of 650 firms showed the balance of companies reporting a rise in output at +8 percent, down from +20 percent in the three months to February, but growth was expected to pick up in the second quarter, the CBI said.

The Bank of England said last week it expected heavy snowfall in February and March meant overall economic growth would a bit slower than it had previously forecast.

Reporting by William Schomberg, editing by Alistair Smout

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UK housing market slows in February as mortgage approvals slide

LONDON (Reuters) – Britain’s housing market slowed in February as lenders approved fewer mortgages than expected, Bank of England figures showed on Thursday.

A row of houses are seen in London, Britain June 3, 2015. British house prices rose at their slowest annual rate in nearly two years in May, as growth continued to moderate after double-digit increases in the middle of 2014, figures from mortgage lender Nationwide showed on Wednesday. REUTERS/Suzanne Plunkett

Britain’s economy grew more slowly on an annual basis than all other G7 countries in the final three months of last year, after consumers were hurt by higher inflation caused by the pound’s fall after the Brexit vote in June 2016.

The housing market has also been sluggish – especially in London and surrounding areas – and earlier on Thursday mortgage lender Nationwide said annual house price growth cooled to a seven-month low in March.

The BoE said the number of mortgages approved for house purchase fell to 63,910 in February from 67,110 in January, below economists’ forecasts of a smaller drop to 66,000 in a Reuters poll.

The central bank raised rates for the first time since 2007 in November, reversing a cut made in August 2016, and last month said rates would probably need to rise sooner and by slightly more than it had thought before.

Economists polled by Reuters expect the BoE to raise rates to a new post-financial crisis high of 0.75 percent from 0.5 percent by May.

Figures earlier this week from industry group UK Finance showed the number of mortgages approved by British banks during February fell by 11 percent compared with the same month last year after rising for the first time in four months in January.

In November British finance minister Philip Hammond cut a tax on property purchases for first-time buyers in an attempt to help younger people get into the property market.

While the housing market has slowed over the last year, there were tentative signs that the mood among consumers brightened a little in early 2018.

The BoE data showed the growth rate in unsecured consumer lending picked up slightly to 9.4 percent in the year to February from January’s 9.3 percent.

And earlier on Thursday market research firm GfK said consumer confidence in Britain increased sharply in March.

Consumer lending in cash terms increased by 1.647 billion pounds, topping all predictions in a Reuters poll that had pointed to a rise of 1.4 billion pounds.

Consumer credit growth has been slowing gradually since it peaked at nearly 11 percent in January 2016.

The BoE has played down any suggestion of a debt bubble, though it has acknowledged pockets of risk and required banks to set aside more money against the risk of bad loans.

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UK watchdog considers ban on some pension transfer charges

LONDON (Reuters) – Britain’s markets watchdog is considering banning certain types of charges for pension transfers and is proposing that advisers gain investment qualifications, it said on Monday, following concern that policyholders are being given bad advice.

FILE PHOTO: The logo of the Financial Conduct Authority (FCA) is seen at the agency’s headquarters in the Canary Wharf business district of London April 1, 2013. REUTERS/Chris Helgren

Following a change in rules three years ago, British pension holders can give up their pension pots at age 55 or above for a lump sum or another investment.

However, the Financial Conduct Authority has come under fire for slowness in preventing “vulture” advisers from persuading steelworkers to give up their “gold-plated” defined benefit, or final salary pension schemes, which give a fixed income for life, for risky investments with high fees.

The FCA said it was seeking views on banning “contingent charging”, in which consumers only pay for the advice if they transfer their pensions.

For firms which only advise on pension transfers, this charging model “has the greatest potential to incentivise unsuitable advice, as such a firm would not be viable if it did not recommend a minimum number of transfers each year”, the FCA said in a consultation paper on improving the quality of pension transfer advice.

The FCA should ban the charges, said Frank Field, chair of the British parliament’s work and pensions committee.

“As pension transfers surge to unprecedented volumes, the disturbing amount of unsuitable advice in this area poses a clear and present threat to the nation’s pension savings,” he said.

Most consumers would be best advised to keep their defined benefit pension schemes, the FCA said, adding “there is potential for significant consumer harm if unsuitable advice is given to consumers who are considering giving up these benefits”.

The FCA also said it was proposing that pension transfer advisers obtain an investment advice qualification.

Reporting by Carolyn Cohn; Editing by Hugh Lawson

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