Fortnightly News Blog – 16 June 2021

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The cost of culture

The need for organisations to protect their culture is permeating the decision-making of leading firms. In June, Peter Harrison, chief executive of Schroders, told The Times (subscription required) that plans to acquire M&G were called off in part due to the damage it may cause to Schroders’ culture. Harrison that forming what would have been a £1trn UK investment colossus would have endangered Schroder’s long-term growth.

“For me, the most important thing for protecting our long-term growth is our culture. You disrupt that culture at your peril,” he said.

Interactive Investor has written to the FCA and the Financial Services Consumer Panel calling for American-style rules requiring fund managers to disclose how much they have personally invested in the mandates they run. Professional Adviser has the story.

Customers are increasingly conscious of the effects of a financial firm’s culture, according to a study from the Business School (formerly Cass), as reported by Money Marketing. It recommends that firms should adopt a more customer-centric approach, as clients do not trust the advice they get from financial services firms.

Regulator falling short in Woodford response

The start of June marked two years since the collapse of Woodford Investment Management. The Financial Times raised several unanswered questions from the fallout, including with relation to its ACD, Link.

In a similar vein, Investment Week’s James Baxter-Derrington questioned how much faith out-of-pocket Woodford investors can have in the efforts of the FCA. Once the ongoing investigation has concluded, the regulator’s disciplinary process can proceed – but this may take more than two years.

ESG latest: Board diversity for investment trusts

A new report from Investec has highlighted a significant uptick in the number of women on investment trust boards – from 8% to 34.5% in the space of 10 years. However, the data – as reported by Investment Week – indicates that this might be a more exclusive club than it sounds as a quarter of directors hold more than one trust board position.

Meanwhile, a Heidrick & Struggles report – covered by the Financial Times – revealed substantial progress on gender diversity on corporate boards. However, much less progress had been made on racial diversity.

Elsewhere, the Investment Association has called on G7 governments to commit to improvements to companies’ climate-related reporting. In a letter written to UK ambassadors and High Commissioners of the countries taking part in this year’s G7 Summit, the group has called for increased cooperation between national regulators and a commitment to mandatory economy-wide TCFD reporting.

On 9 June, the UK government set out its plans for a green taxonomy, designed to define sustainable investments in a similar fashion to the EU’s SFDR.

Compliance to the fore

Outspoken investment boutique SCM Direct has lambasted asset managers for reporting negative transaction costs – and the FCA has promised to investigate, according to Ignites Europe (subscription required).

The regulator has admitted there are “problems” with the methodology for calculating transaction costs under PRIIPs rules and will consult on changes this year.

The Central Bank of Ireland has also said fees and costs are “an area of active consideration” – many of the products flagged by SCM’s research are domiciled in Dublin.

And finally…

In the US, BoardIQ reports (subscription required) on a recent legal debate that has sparked questions around directors’ interests in both fund and corporate boards. The article hinges on a lawsuit that named multiple operating companies as defendants, criticising their compliance and “indirectly pointing the finger at corporate board directors”. The writer raises questions about whether directors can sit on both corporate and fund boards, particularly when their funds might invest in their corporates.

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