Brexit threatens UK fund management's global influence

Posted in Google Brexit News
at 2016.10.23
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Brexit threatens UK fund management's global influence

The language around Brexit has changed. Where initially people were referring to a “hard” or “soft” exit from the EU, the word among policymakers now is increasingly around achieving a “clean” Brexit.

But the implication of this is still a withdrawal from, or limited access to, the single market. For asset managers this means their ability to market products and services across the EU bloc will be impaired due to a loss of passporting rights.

When we speak to management teams across the sector, it is clear that the issue of passporting remains front of mind. However, it is by no means the sole concern.

Of all the financial services sectors, wealth and asset management has been the most vocal since the Brexit vote: 71 per cent of the big fund houses have made public pronouncements, from lobbying for key issues, to raising questions about potentially relocating operations, staff or domicile.

Fewer than half of the big banks have spoken publicly about Brexit — and many have been required to do so as quoted companies.

For asset managers, the question of passporting has been paramount since the referendum, but more than three months on, the narrative is beginning to shift. Of the companies that have spoken out on the impact of Brexit, nearly a quarter have highlighted free movement of people as a significant issue.

The ability to recruit the brightest people from across the world is part of what has made the UK’s fund management industry so successful and such a great sector to work in. As is the case for us, in professional services, and for our clients in asset management, we know that hiring and maintaining a diverse workforce result in strong teams.

Asset managers are increasingly vocal on this issue, with high-profile companies speaking out in the past few weeks. Schroders recently called free movement a “critical” issue for the company. Similarly, Maarten Slendebroek, the chief executive of Jupiter Asset Management, recently told the Financial Times that the rights of their EU staff working in London are a “top priority”.

Despite its importance to industry, official guidance on free movement has been unclear so far, although the government’s stance on immigration control appears to be hardening.

Chancellor Philip Hammond’s comment that the government would “certainly facilitate the movement of highly skilled people between financial institutions” goes some way to provide reassurance but the statement still poses too many questions. What does being “highly skilled” constitute and who will be eligible?

Passporting and free movement of people are just two, albeit important, concerns that will dictate what the asset management industry will look like after Brexit. Whether we have access to the single market or not, in our negotiations with Brussels we need to consider what the UK stands to lose if we fail to preserve the prestige and global position of our fund management industry.

The UK has a leading position in investment management worldwide, and the benefits of this are felt well beyond the country’s shores. As home to some of the largest investment houses, the sector holds company management teams to account across the world and performs a crucial corporate governance function on an international scale. Protecting this status means more than simply finding a solution to how the industry can continue to market its funds across the EU.

Negotiators will need to carefully assess the different, and sometimes fluid, priorities across subsectors within financial services, and within the wealth and asset management sector itself. This is not going to be easy, but now that party conference season is behind us and negotiating lines are being prepared in earnest, policymakers must engage with an industry that has been more forthcoming than some of its financial services cousins.

We should remember that innovation is one of the great enduring strengths of the UK’s financial services. The signs are certainly there that this industry can, and will, evolve and add value to its clients under any circumstance. I have no doubt that, with the full backing of government, asset managers can grow even stronger in a post-Brexit world.

Julian Young is wealth and asset management partner at EY, the professional services firm

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Published at Sun, 23 Oct 2016 05:14:13 +0000

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