According to Marten & Co, this may mean fewer seminars and conferences for advisers. The research note states: “Investor conferences organised by the sell side are likely to reduce dramatically and will probably all but disappear in the medium term.”
Moreover, will providers try to make aggressive cost assumptions to make their costs look lower than another provider doing very similar business?
According to Ms Watts, SEI asked the FCA about these practical challenges with calculating the figures for disclosures, and the fact clients could end up being “overloaded by information” and ultimately more confused.
Ms Watts says: “The FCA has made it clear that it expects firms to have conversations with clients to explain the changes.”
There could be another potential downside, as Hugues Gillibert, chief executive of Fitz Partners, points out.
He says while investors will only end up paying for costs relating to their investments, and not to a share of all research bought by a firm, this could “limit the choice or breadth of research available”.
Only time will tell if the legislation does limit such research, and if this has a knock-on negative effect on people’s investments.
Better market
Ms Gibson claims the additional transparency and scrutiny will benefit both advisers and the end investor.
“For advisers and investors this means the emergence of a market where research costs are directly linked to the quality and quantity, and the investor value of research services,” Ms Gibson says.
CMS’s Ms Altkemper agrees, suggesting that as costs come down and transparency makes the fee structure far clearer to clients, this could incentivise them and their advisers to shop around much more for the best possible fund recommendation.
Moreover, she says: “There is an expectation that the quality of investment advice will improve, because it is no longer tainted by the kind of conflicts that may arise where research is received for free.”
Many industry commentators broadly welcome regulation that works to provide better client outcomes.
Richard Romer-Lee, managing director of Square Mile Investment Consulting and Research, says such regulation will help create a financial services market that “functions effectively and efficiently”.
He says this is becoming ever-more important as the responsibility for saving, and the risk if one’s saving strategy does not work, falls increasingly at the feet of each investor.
“The consequences of a strategy not working is likely to impact many things: the person’s standard of living, how much they need to save, how long they will have to work, and the amount of risk they may need to take with their investments,” he says.
“Certainly in this country, the government and regulator are well aware of this and are continually working on creating an environment where the financial services industry will share some of the risk, to help deliver better outcomes.”
