Wma journal march 2014

WMA JOURNAL Working for the Investment Community & their Clients

WMA The journey to WMA For more than 23 years, the Association of Private Client Investment Managers and Stockbrokers has been working to ensure that regulatory changes always reflect the needs of its members and through them, the needs of the private investor.

We have built a reputation over the years as an efficient and effective trade organisation, renowned for punching above its weight and representing a wide-range of members on countless issues.

For some time, the APCIMS membership has extended well beyond investment managers and stockbrokers; it also includes as members private banks, discretionary fund managers and other financial firms who undertake the activity collectively known as wealth management.

The member research undertaken for us earlier this year showed a clear desire to change the way in which APCIMS is presented and perceived. Additionally, a recent report from the Centre for the Study of Financial Innovation noted that trade associations are now more likely to be defined by the services their members provide, rather than the kinds of institutions they represent.

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Contents

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Business continuity: make it your business Reduce the cost of your business continuity programme with the right outsourced service provider

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Counting the cost of poor client experience The quality of interaction and communication is impacting winning and retaining clients more than ever before

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The opportunity to ‘do good’ and to ‘do well’ together Through investing in social impact businesses, the two do not have to be mutually exclusive

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Annual Conference 2013 The first Annual Conference under the Wealth Management Association banner was held in the Dorchester Hotel in London

Up until now our name has stated who our members are, rather than what they do. That is why we are changing our name to the Wealth Management Association.

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This move also answers general industry developments and the recent changes at the Financial Conduct Authority with the launch of its Wealth Management and Private Banking Unit.

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We are changing our name, but not what we do. We will continue to represent the investment community across the spectrum from Execution Only service through to Advice and then to Discretion.

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Today’s investors are seeking out the very best sources of investment advice and the need for professional wealth management services has never been greater.

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Whatever stage we are at in our lives, we all need to prepare for our financial futures, and we need the best possible assistance to get there.

Changes in the industry: how has RDR impacted your HNWI clients? The newly published Competitor Landscape 2013 report sheds some light How Morningstar’s Quantitative Equity Research Team value 28,000 company shares Filling in the gaps left by typical investment analysts

Wealth management in the eyes of the investor: the results ComPeer asked 1,000 clients key questions about the service they receive Private Wealth Managers’ Involvement in UK Initial Public Offerings In association with WMA, Peel Hunt canvassed the WMA membership and published this report

As the Wealth Management Association, we will continue working with regulators, legislators and policymakers to ensure the wealth management industry remains a thriving sector.

We will keep acting in the best interests of our members, in the same way that wealth managers across the country act in the best interests of their clients.

Dr Tim May, Chief Executive Officer, Wealth Management Association

www.thewma.co.uk

WMA JOURNAL 3

BUSINESS CONTINUITY

BUSINESS CONTINUITY

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Business continuity: make it your business F acts, figures and estimations from industry experts show that an extremely robust business continuity programme typically costs an organisation less than 1% of its annual turnover (Continuity Insurance Risk (CIR) magazine, 29.08.13). By opting for an outsourced service provider that knows your industry and is in tune with the very latest technological advances, this percentage could be further reduced.

Sentronex estimates that for its clients, the cost of Disaster Recovery (DR) solutions can be as low as between 10 and 20 basis points.

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n a 2013 survey carried out by the British Standards Institute (BSI) in association with the Business Continuity Institute (BCI), “14% of UK based businesses expected to see an increase in business continuity spending. A total of 58% of those asked stated spending would remain the same and 16% expected to see budgets cut.”

To take the financial services industry in particular, “26% of those surveyed predicted an increase in business continuity budget, while 62% stated it would remain the same and 10% foresaw a cut” (Horizon Scan 2013, Survey Report).

As we enter 2014, how do these statistics fare? Are financial businesses making DR plans a priority?

In our experience, DR strategy and Business Continuity Plans (BCPs) are beginning to be more of a focus at high level board meetings. Why? Because DR is about understanding operational risk. Every financial firm should know the risks it faces and mitigate these accordingly. Going forward, there is definitely still scope to make DR and risk management part of each financial organisations’ on-going business plan.

Why review your BCP at all?

It is widespread knowledge that you can’t put an exact price on the cost of damages caused, should disaster strike and a business not have a suitable continuity strategy in place. When discussing business 4 WMA JOURNAL

Business continuity is about simultaneously delivering resilient business performance and protecting an organisation’s reputation

continuity with financial firms, one of the main reasons they have a BCP at all is for regulatory purposes. However, there are a number of other reasons to regularly review both a DR strategy and a BCP that can be of long-term benefit to any organisation.

Once a plan is written or revised, ensure it is frequently reviewed thereafter.

• DR with a Roadmap – when there is a BCP in place, complement it with an IT Roadmap. By laying out your IT strategy for the future, you will know what changes to expect and how these will impact an existing BCP. From a budgeting perspective, an IT Roadmap works well.

What disaster?

The word ‘disaster’ in business continuity conversations often refers to the most serious events that could strike – the unthinkable and catastrophic. But what about much smaller, localised issues that may still prohibit access to your offices? Flooding, power outages, a security breach, a fire in a building nearby, or even protests taking place on the streets, could mean you are unable to trade or look after your customers. As a financial business, it is a good idea to review a plan so that it encompasses an alternative recovery strategy. Once provision is made, it is important to educate new and existing staff of the protocol should an invocation take place, while ensuring all regulatory requirements are met.

Business continuity is about simultaneously delivering resilient business performance and protecting an organisation’s reputation. With increased cyber threats, unpredictable weather and unplanned IT and telecom outages, the importance of business continuity is growing in momentum. In 2013, the overwhelming majority of financial services firms predicted DR budgets would stay the same or increase. As we move into 2014, it is undeniable that DR strategy and business continuity planning will become even more prevalent as business factors.

The cost of DR to an organisation will depend on infrastructure, what is deemed appropriate by the regulator and what company it is that delivers the solution. By working with a service provider that understands your industry, business and its operational risks, you will get true value out of your DR solution.

IT and its impact on the BCP A BCP must support the framework of a business. In the last year alone, the IT landscape has changed dramatically. As new technologies enter the market and updates and upgrades for systems and platforms are rolled out, a business’ infrastructure alters.

Future proofing a business’ technology is one thing; updating a BCP to reflect those changes is another. However, by successfully carrying out both, a business can benefit from significant competitive advantage.

Business alignment: In the same way a BCP should reflect technical changes, a plan should also mirror a business’ resources. To maximise the efficiency of a plan, it should be scaled up or down to remain in line with the needs and requirements of that business. Markets are improving but it is still tough for many financial firms which can mean a decrease in headcount. Making changes to a BCP to reflect this will keep costs down which could help elsewhere in the business.

Marketing your business: A solid, robust BCP is an attractive selling point to investors, shareholders, clients and employees. For minimal time, money and effort, the reward is great: market edge and a key Marketing tool. With impending MiFID II and AIFMD legislation, the inevitable impact it will have on DR planning for financial services businesses, a regularly reviewed and updated BCP is a simple way to be prepared and most importantly, be ahead of the game. Where appropriate, it might be worth considering third party contingency plans too. The nature www.thewma.co.uk

of the fact this has been planned for will reflect well on any business.

Disaster recovery, don’t run: Make a DR strategy part of on-going business operations for the future and you will reap the rewards. In today’s economic climate, it can seem challenging to plan for the ‘what-ifs’ but once there is a standard BCP in place, the difficult part is done; the management of a BCP tends to be much more simple.

Below are a few pointers to remember when thinking about the importance of www.thewma.co.uk

business continuity for 2014 and creating and/or updating a BCP: • Say no to ‘break-fix’ – to protect a business’ finances and its reputation, do not opt for a ‘break-fix’ DR solution.

Instead, prioritise the thorough planning of a business continuity strategy.

• Create an in-house committee – select a committee who will regularly meet to discuss the BCP. Enlist the help of a business continuity consultant or your in-house representative to assess the businesses’ needs and requirements.

Joe Sluys CEO of Sentronex @sentronexnews http://www.linkedin.com/in/joesluys Sentronex delivers the following IT solutions to London’s financial community: IT Support, Disaster Recovery, Financial IT Consultancy, Cloud Computing, Hosting and Connectivity solutions.

Company URL: www.sentronex.com Telephone number: 020 7397 7400 Email: sales@sentronex.com WMA JOURNAL 5

CLIENT EXPERIENCE

SOCIAL IMPACT BUSINESSES

Counting the cost of poor client experience Suitability, compliance and business growth are top of mind concerns for wealth management executives and Private Bankers, and those who track behavioural client research are increasingly concerned about client experience. More than ever before the quality, frequency, efficiency and relevance of all client interactions and communications are significantly impacting winning and retaining clients.

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ealth firms are concerned about client experience, and rightly so, because poor client experience leads to attrition and everyone in the business has to work harder just to stand still. The loss of a client with over three million dollars in assets costs the firm around $20,000 in lost revenues alone.

Add to that the lead time for acquiring a new client (typically eight weeks), requiring four or more meetings and many hours spent preparing presentations and proposals, with a relationship manager whose compensation is in the region of $600 per day, and it’s clear to see how replacement costs can easily escalate.

Speaking with industry analysts and wealth management firms on a daily basis, as I do, I have noted three key themes which recur on a regular basis. Each requires wealth management firm to re-examine the way they communicate and share information with clients if they are to remain competitive.

First, the majority of wealth management advisors spend most of their time on nonclient-facing work. Much of this time is spent preparing for client calls and meetings, preparing presentations and proposals and meeting compliance requirements, leaving less time to look for new business. Even relationship managers spend little more than 50% of their time on client-facing work, much of which is spent discussing valuations, reviewing progress and responding to enquiries previously submitted by email or phone.

Second, the average relationship manager is typically responsible for more than 100 client relationships and conducts less than 30 face-to-face meetings with clients and prospects a month. At best, they are able to reach less than a third of their clients in person on a monthly basis; some clients may not be seen for two months or more. Without a doubt wealth managers must be certain 6 WMA JOURNAL

they are communicating effectively with clients in-between meetings, in a way that suits clients’ preferences and lifestyles, to avoid dissatisfaction and attrition.

Third, the vast majority of advisors do not use technology to facilitate interactions with clients and prospects during meetings.

A very small percentage – 4% according to CEB TowerGroup – regularly or very often use tablet devices. This is despite the rapidly growing body of evidence from numerous sources that clients respond more favourably when reports and meeting packs are presented using tablet devices, which are more agile than static paper-based documents.

There are a number of initiatives that I believe wealth management firms should consider, to help address the issues raised.

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Create more time for client-facing work Advisors and Client Services teams want to spend more time engaging with clients than preparing client communications, answering routine enquiries and manually ticking compliance boxes. Senior wealth management executives are now, as a matter of priority, approving expenditure that facilitates clientfacing work. Automated client reporting solutions eliminate 60-90% of the manpower required to prepare client communications, and they allow tens of thousands of reports to be run in a just a few hours, enabling client-facing professionals to spend more time ensuring client satisfaction, improving client experience, prospecting for new business and cross-selling to existing clients.

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Empower clients with 24/7 access Without a doubt wealth managers have insufficient time and manpower to communicate effectively across their entire client base and address increasing

numbers of ad hoc enquiries, as they arise.

According to Scorpio Consulting, high net worth clients typically use three mobile devices, spend 48 hours per week on the web (50/50 work and social) and 19-28 hours per week communicating digitally. Digital communication has become a way of life and clients have a growing requirement to use online and mobile tools when they interact with all service providers. They expect nothing less from their wealth manager.

There is now solid evidence to support the notion that web usage breeds client loyalty.

Scorpio found that the HNW clients who spend the most time on a wealth manager’s website are more likely to remain a client even if their advisor leaves the firm.

No-one is suggesting that electronic communications will ever replace face-toface meetings however, the more wealth managers empower clients to gain real time access to portfolio valuations, statements and other client communications, in between meetings, the more engaged they feel.

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Provide advisors with more versatile presentation tools HNW clients are increasingly tech-savvy in their own usage of mobile devices. They have a high expectation that advisors will arrive with a tablet device in their briefcase rather than a stack of paper reports under their arm.

In addition to saving paper and ink, advisors armed with tablets can access historical reports or analyse real-time figures online, as required, which is far more conducive to an effective and fully-informed discussion.

When wealth managers automate the client reporting and communications process using best practice methodologies, the effects ripple throughout the entire business. Have you reviewed the way you communicate and share information with clients in the last five years? If not, perhaps it’s time you did.

Alan Hamilton is CEO at Equipos T: +44 (0)207 933 8720 For more information visit www.equiposgroup.com www.thewma.co.uk

The opportunity to ‘do good’ and to ‘do well’ together It is the contention of the Social Stock Exchange that social impact businesses can offer sound investment opportunities. In order to test this hypothesis, an investible ‘virtual’ index was created. Empirical evidence from this index demonstrates that it is possible to invest in businesses that ‘do good’ (socially/environmentally) without sacrificing the opportunity to ‘do well’ (financially).

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here is a growing desire on the part of individuals and organisations to use their wealth more productively.

Increasingly, people are driven to invest their money in ways that address a social need, such as a prison or affordable homes or address an environmental issue, such as sustainable energy or recycling.

Recent developments in the regulation of financial services offerings are supportive of the concept that the consumer may have goals beyond financial. In a recent survey of financial planners, 75% suggest that their clients have an interest in social investment.(1) Financial www.thewma.co.uk

advisers who establish whether a client has social objectives alongside financial objectives will need to take these objectives into consideration when putting in place a financial plan. As a consequence, a third dimension is being added to the traditional management of risk and return and this is ‘Impact’.

Impact investment Impact investing is a new field, which offers a wide variety of asset classes and forms.

Impact investments are made with the intention of generating measurable social and environmental impact (a “social dividend”) alongside a financial return. A segment of impact investments may seek to achieve market-rate risk-adjusted financial returns while others offer below market returns in return for the impact created in so-called ‘blended value’ investments.

Impact investing does complicate the job of the investment manager by adding this third element of impact; which is one that is often difficult to quantify. The good news is that many initiatives are underway to report impact. One of these is the Impact

Report format developed by the Social Stock Exchange. This report seeks to provide a standardised platform in which companies across a variety of industries are able to disclose, articulate and evidence their social or environmental impact.

Opportunity for impact investing in publicly listed companies Impact investing opportunities cut across a variety of asset classes, from cash to debt to equity to real estate. Debt financing dominates equity financing by a large margin.

Within equities, investment into the equity of publicly listed companies that are social

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There is an inherent conflict between the financial goals of a publicly listed company (and a duty to shareholders) WMA JOURNAL 7

SOCIAL IMPACT BUSINESSES

impact businesses is being recognised as a viable investment strategy by a growing number of industry participants.

There is a concern among both investors and companies that perhaps there is an inherent conflict between the financial goals of a publicly listed company (and a duty to shareholders) and the impact goals of being a social impact business. Frequently there is not. High returns do not disqualify an investment from being social. The environmental space is a prime example of this. The initial investments in sectors such wind, solar, and fuel cells were attracted by the perception of high financial returns.

There is reason to believe that the growth and return prospects for many of the areas which address a social need will also be strong, the strong policy push in the UK to open up public sector markets is one driver for this.

From a corporate perspective, managing a business for sustainability and stakeholder returns is an extension of managing a business well. Recent acknowledgement of this in the form of standards and guidance around Corporate Governance is moving this into mainstream management and organisational behaviour.

The Social Stock Exchange, which officially launched its platform in 2013, has been actively researching and seeking out socially and environmentally minded businesses. It has been tracking a number of businesses that are often not easily visible or distinguishable as high impact businesses on stock exchanges. The Social Stock Exchange has used an element of this portfolio focusing on those entities that are listed on London equity markets as the basis for this research.

Testing the hypothesis As opposed to being a difficult area in which to find good financial returns, it is the contention of the Social Stock Exchange that social impact businesses can offer sound investment opportunities. In order to test this hypothesis, an investible “virtual” index was created to investigate the financial performance of the equity of publicly listed companies that are also high social or environmental impact businesses. Data for publicly quoted UK stocks and is used and results over one, three, and five years presented. Empirical evidence demonstrates that it is possible to invest in businesses that ‘do good’ (socially/environmentally) without sacrificing the opportunity to ‘do well’ (financially).

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The SSE chose to create an index of social impact businesses in the UK which equities are traded on the London Stock Exchange The Social Impact Business Index (SIB Index) The SSE chose to create an index of social impact businesses in the UK which equities are traded on the London Stock Exchange.

It identified a list of 60 companies that trade currently and that fit into its criteria for being a social impact business. Taking into account the liquidity constraints of creating a £100 million portfolio, the list narrowed to 38 companies.

The index created is market capitalisation weighted and rebalanced weekly. If a company listed its shares during the measurement period, the shares were added and the portfolio rebalanced at the time of entry onto the LSE. There were five new entrants over the five-year period. Only one of these appears in the Top 10 constituent list and joining June 2013 had limited influence on the overall performance of the index over the period.

We based the index on 28 August and examined historical data for five years. This period includes the extreme volatility and lack

SOCIAL IMPACT BUSINESSES

of liquidity of late 2008/early 2009 as well as the bull market run in smaller capitalisation stocks of the past 18 months.

The sector weighting of the SIB Index is shown below. The most significant variations versus the FTSE indices are lower weightings in energy/materials and telco/utilities, made up for by higher weightings in financials, healthcare and technology.

Chart 1: Sector weight of the SIB index

Index Performance – Total Return (August 28, 2013) Annualised

5yr 3yr 1yr SIB Index FTSE 100 FTSE 250

3.7% 4.6% 10.5%

18.8% 11.1% 17.5%

26.4% 15.0% 30.7%

Index Risk and Return Characteristics (August 28, 2013)

Volatility (%)

5yr 3yr 1yr

Sharpe Ratio 5yr 3yr 1yr

SIB Index FTSE 100 FTSE 250

0.18 0.21 0.46

20.1% 22.2% 22.7%

11.8% 15.2% 16.1%

10.04% 11.90% 13.22%

1.59 0.73 1.09

2.63 1.26 2.32

SIB Index vs Market Bechmark (August 28,2013)

Annualised Excess Return 5yr 3yr 1yr

Beta Volatility 5yr 3yr 1yr 5yr 3yr 1yr

vs FTSE 100 vs FTSE 250

-2.8% -7.8%

0.74 0.84

5.6% -0.1%

9.1% -1.0%

0.80 0.92

0.62 0.73

17.4% 15.5%

12.2% 11.9%

10.9% 11.3%

Table: Index performance, Risk and Return Characteristics. Source: Bloomberg Data, FTSE, Signia Wealth, Social Stock Exchange.

The results The performance results of the SIB index over one and three years are shown below:

Pricing at 28 August. Source: Bloomberg Data, FTSE, Signia Wealth, Social Stock Exchange. www.thewma.co.uk

The results are supportive of the hypothesis that an investment into Social Impact Businesses may generate risk adjusted returns that are in line with the overall equity market.

Over a one-, three- and five-year period, the SIB Index has generated risk-adjusted returns that are in line with that of the major UK equity market indices.

On a total return measure (price plus dividends) the SIB Index has delivered equal or superior returns to both the FTSE 100 and the FTSE 250 indices over a three-year basis. Over a five-year basis, the total returns lag. There are two causes for this.

On a price only basis, the SIB Index modestly underperformed the major indices in this period. This inferior price performance occurred in the early part of the measured period (late 2008/early 2009) when extreme volatility and the drying up of liquidity had a particularly negative impact on smaller capitalized companies. This can be seen clearly on the price charts above. The other reason for underperformance over this period is the inclusion of what was a relatively high level of dividend payment in the beginning of the period for the FTSE Index companies. Given the index calculations are based on time weighted period returns, these high payments early in the series have somewhat distorted the results. Over a one-year period, the risk-adjusted returns of the SIB Index are in line with the FTSE 250 and significantly higher than the FTSE 100. www.thewma.co.uk

On a correlation basis, the index showed encouraging results. In all periods, the beta of the portfolio was less than that of the market indices. Taking into account returns and volatility, the risk adjusted returns, as measured by the Sharpe ratio, were positive in all years on an absolute basis and superior to the indices on a three- and one-year basis.

These results imply that investors in the companies comprising the SIB would be giving up either none or an almost negligible return versus the broader equity market. Of course, they would be gaining ‘the social/ environmental dividend’ of investing in SIBs. Interpreting the results It is not surprising to us to see the favourable price performance of this Index given the industries in which SIBs operate. Many impact areas are growth areas: renewable energy, sustainable agriculture, sustainable trading companies (e.g. organic, fair-trade, natural products), financial services, social housing, health/social care and arts, culture, sports/ fitness and education.

The lower beta of the portfolio is most likely explained by the lower industry weightings in energy and materials of the SIB to the FTSE Indices. The major negative performance was due to a lack of liquidity causing price volatility in a period of high uncertainty (late 2008 early 2009 in particular which had a greater impact on smaller companies). As the financing and growth of impact businesses develops, this liquidity penalty will improve.

Implications This study validates the view it is indeed possible to make investments in the public markets that align wealth and social values. The Index was formulated to allow an investment of £100 million to be made; illustrating that investors seeking the liquidity and transparency of the public market can look to achieve their social goals while not sacrificing a financial return. It is important to note that this index was not actively managed. In an actively managed portfolio, investment decisions would most likely be taken that would add to financial returns by taking an active decision to exclude market under-performers.

Observations Investors are able to make investments into publicly listed SIBs and achieve financial returns in line with the overall equity returns while, in addition, creating a ‘social dividend’.

The pool of investments available to impact investors will grow significantly due to a supportive political and social agenda. We expect to see a significant number of products targeted at this market to be created.

By helping to finance businesses that address the challenges of environmental limits and social change, investment and finance have the opportunity to play a key role solving core issues which society faces.

Diana Robinson and Jon Grayson The Social Stock Exchange www.socialstockexchange.com WMA JOURNAL 9

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Annual Conference 2013

This year we chose to hold our first annual conference under the banner of the Wealth Management Association in the Dorchester Hotel in London.

Continuing on the success generated in the last two years we are pleased to say that over 330 people registered for the event this year. As has been the case over the last few years, with this event we try to cover a diverse range of topics which in any given year might include a selection from politics, regulation, investment, operations etc. However, with this year being the inaugural WMA conference and itself taking place on the official date of rebranding, we felt there was a need to look more closely at our own community.

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www.thewma.co.uk

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ANNUAL CONFERENCE 2013

Agenda 9.00 – 9.10

Welcome

14.25 – 14.50

The Scrutiny Role of UK Parliament

Tim Ingram, Chairman, WMA

in EU Economic and Financial Affairs

9.10 – 9.40

The Challenge of Conduct Regulation

Lord Harrison

John Griffith-Jones, Chairman, FCA

14.50 – 15.30

Living the Dream

Liz Jackson MBE, entrepreneur

and businesswoman

9.40 – 10.10

Underwriting at Lloyds

Neil Smith, CEO, Hampden ..........

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ighlights of the morning session included a presentation by FCA chairman John Griffith-Jones and a Wealth Management panel that included four CEOs from within our membership who were probed by WMA chairman Tim Ingram on the issues that were currently concerning them. In this session delegates were able to get a glimpse from these firms of just four of the varied business models that make up our trade association’s membership. Completing the morning session were presentations by Neil Smith of Hampden Capital and Verena Ross of ESMA. Our afternoon speakers proved just as interesting and entertaining as those who preceded them. Dr Frederick Mulder spoke about his life and his passion for both art and philanthropy. Lord Harrison informed delegates of the scrutiny role of the UK parliament in EU economic and financial affairs. He was in turn followed by Liz Jackson, a successful entrepreneur and business woman who enthralled and inspired those present with her achievement and her “can do” attitude – achievements made all the more remarkable given she is blind.

The final session of the conference was dedicated to economics and the markets. Three economists delivered excellent presentations beginning with Kevin Gardiner of Barclays who provided a very positive picture of the UK and the world in a presentation entitled ‘Life after Debt’. He was followed by Katie Koch of Goldman Sachs who focussed on emerging markets, making a very good case for investing in them. Finally Dr Gerard Lyons (Economic Advisor to the Mayor of London) put the microscope on the UK in the context of the global economy.

After the formal part of the conference was over, a drinks reception was held with our special guest speaker Rory Bremner who entertained those remaining with jokes and impressions of politicians and other public figures. This light-hearted end to the day ensured everyone left with a smile on their face.

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Agencies Limited

15.30 – 16.00

Afternoon break

10.10 – 10.40

Morning break

16.00 – 16.40

Life after Debt

10.40 – 11.40

Wealth Management Panel chaired by

Kevin Gardiner, Chief Investment Officer

Tim Ingram

Europe, Barclays

Richard Charnock, Chief Executive Officer,

16.40 – 17.20

Emerging Markets:

Standard Life Wealth

Underperforming, Unloved

Nick Hungerford, Chief Executive Officer

and Underappreciated

Nutmeg

Katie Koch, Managing Director,

Goldman Sachs

17.20 – 18.00

Positioning the UK in a Growing Global

Paul Killik, Senior Executive Officer,

Killik & Co

Simon Lough, Chief Executive, Heartwood

Economy

11.40 – 12.10

The EU Legislative and

Dr Gerard Lyons, Economic Adviser to the

Regulatory Agenda

Mayor of London

Verena Ross, Executive Director, ESMA

18.00 – 18.05

Closing remarks

12.10 – 12.20

A review of the morning

Dr Tim May, Chief Executive Officer, WMA

Dr Tim May, Chief Executive Officer, WMA

18.05 – 21.00

Drinks reception with special guest

12.20 – 14.00

Lunch

14.00 – 14.25

Picasso, Profits, and Philanthropy:

Another Kind of Business

Dr Frederick Mulder CBE, private art dealer

www.thewma.co.uk

speaker

Rory Bremner, impressionist, playwright

and comedian

WMA JOURNAL 13

RETAIL DISTRIBUTION REVIEW

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There was good growth both in individuals paying a fee based on transactions and fees based on time spent (per hour charge) transparent charging structures. There was good growth both in individuals paying a fee based on transactions and fees based on time spent (per hour charge). Almost one in ten individuals are now paying for their advice on a time-spent basis.

This shift in charging structures levied by the industry is in line with HNWI preferences identified in past research done by Ledbury, where both transaction fees, or fees based on time spent/advice given, pipped fees based on a percentage of AUM. Interestingly, the most popular fee option identified by HNWIs in this research was a fee based on performance/profit generated, a challenging option which has yet to be taken up widely within the mainstream industry. Although we would argue that it would be a powerful relationship-building tool for wealth managers, binding the fortunes of providers with their clients, and would also allow wealth managers to share in meaningful upside if they are to succeed in managing their clients’ wealth successfully.

Changes in the industry: how has RDR impacted your HNWI clients?

While RDR has brought visible change inside wealth managers, it has been much harder to gauge what impact it has had on the industry’s clients, who were supposed to benefit from it. Have high net worth individuals (HNWIs) noticed a difference, and if so, is it positive or negative? Drawing on select findings from our newly published Competitor Landscape 2013 report, Ledbury Research sets out to provide some conclusive answers. Some of the results will give the wealth management industry and its regulators pause for thought.

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t has been hard to walk more than a few paces within a wealth management office recently without hearing references to RDR or seeing the impact that it has had. While the results on the industry are becoming increasingly clear, what has been much less discernible is the impact RDR has had on clients, who the industry relies on.

Feeling it in the pocket The first area we explore is what changes HNWIs have seen when it comes to the fees that they pay in the wake of RDR. For this, we drew on research conducted early in 2013 among 200 UK HNWIs with investable assets

of £1m+. On average, clients have seen a 7% increase in fee levels. The increases are, however, by no means uniform. They have been shouldered by a relatively small number of individuals, some of whom have seen fairly material increase. The majority of HNWIs report no change. (Chart 1).

In the same research, we also asked HNWIs how they were charged for financial advice before and after RDR to identify changes in the charging patterns. Here again, there were noticeable changes, with a growing move away from the common fee structure based on a percentage of invested funds and a corresponding move towards more www.thewma.co.uk

Do HNWIs value the advice that they are given?

Fees are, of course, just one consideration that HNWIs take into account when evaluating their wealth management service. What is much more important is the quality of advice that they provide. So how is the industry doing in this regard? Our large-scale annual benchmark of 500 managed clients with at least £500,000 in investable assets conducted at the end of 2012 provides some indication of the path and progress of the industry as it made final preparation for RDR. Worryingly, the overall picture when it comes to the quality of perceived advice remains very similar to what it was the previous year, which means that RDR has had very little impact (Chart 2).

As an industry, there is certainly lots of room for improvement in this vital area, with one-inthree clients only marginally impressed when it comes to the quality of advice, and one-in-ten www.thewma.co.uk

Chart 1: Source: Ledbury Research Millionaires Omnibus Q1 2013

Chart 2: Source: Ledbury Research Wealth Management Benchmark 2013

being unimpressed. There is real upside from getting this right. With clients who are happier with the quality of advice typically placing a larger share of wallet with their provider. A total of 69% of those who felt they received good advice had more than half of their wealth being managed by the provider in question.

Stuart Rutherford Ledbury Research Ledbury Research is a specialist agency to businesses who want to understand

and engage with HNWIs and has recently published their Competitor Landscape report which examines the changes in the wealth management industry over the past year.

The report leverages Ledbury’s unique grasp of competitors built up from conducting both consumer and industry research. It provides real intelligence for providers looking to pinpoint client segments, exploit competitor vulnerabilities or increase their own share of wallet.

WMA JOURNAL 15

INDIVIDUAL STOCK VALUATION

INDIVIDUAL STOCK VALUATION

How Morningstar’s Quantitative Equity Research Team value 28,000 company shares from around the world It is common knowledge that individual stock valuation can be tremendously valuable and perhaps even indispensible for stock selection and portfolio construction. At the same time, however, it is equally well understood that individual stock valuation done right tends to be a time-consuming process for even the most keen and fastidious analysts. Given the constraint of time, it has not been a scalable business historically. Typically, a firm will employ a group of analysts to analyse a specific coverage list which is much smaller than the whole investable universe and consequently, many names are left uncovered and unnoticed.

Investment decision makers, such as advisers or portfolio managers, are then left to fill in the holes themselves.

16 WMA JOURNAL

A

t Morningstar, we’ve been wrestling with this problem for some time and we think we’ve made a significant step in the direction of progress. Currently, our analysts cover approximately 1,700 equities globally providing both fair value estimates and economic moat ratings.

To complement our analysts’ work, we developed a series of quantitative equity ratings that are philosophically analogous to the ratings our analyst staff produces.

In essence, we tuned a scalable, statistical model to the specific preferences our analysts have exhibited in the past and built it in such a way to incorporate any changes to their preferences in the future.

How can this be done?

First, market-based and fundamental factors are paired with our proprietary analystdriven ratings into a massive dataset. Some of the individual factors included in the

dataset are market capitalisation, earnings yield, book value yield, enterprise value, and return on assets. With the dataset compiled, a machine-learning algorithm known as a random forest is employed to look across this high-dimensional dataset and identify the sets of factors that most highly correlate with different ratings. Once these sets of factors are learned, the model can be easily applied to any new equity list and their factors. Using this approach, we achieved an extremely high degree of accuracy in matching our analyst ratings to the equities they cover. We aren’t the first to find usefulness from these types of models as random forests have been adopted in systems like the Microsoft Kinect and the Netflix recommendation engine. They are also one of the models of choice for genetics researchers attempting to correlate certain genes with instances of disease, like multiple sclerosis and early-onset coronary heart disease. www.thewma.co.uk

Chart 1: Performance (Since Live Inception) – Full Universe

Chart 2: One = Most overvalued quintile, Five = Most undervalued quintile www.thewma.co.uk

With this methodology, Morningstar is now able to deploy this statistical model on all global equities and effectively have an opinion, driven by our analysts, on approximately 28,000 equities around the world (14x increase) and 5,000 equities in the UK and Europe (13x increase).

Given the breadth of coverage, individual quantitative equity valuations and moat ratings can now be aggregated up to the fund level, sector level, country level, or any level in between to provide macro insights.

Another benefit of the quantitative ratings is their level of granularity. Given the nature of the computation, the quantitative ratings can be displayed numerically on a continuum and thus offer a richer picture of the equity universe than our analyst ratings have provided historically. For example, for the Moat Rating, Morningstar analysts ascribe a rating of No Moat, Narrow Moat, or Wide Moat. However, the quantitative moat rating is displayed numerically allowing investors to see the level of “moatiness” a company has (i.e. widest Wide Moat stock), as well as how it’s trended over time.

Of course, none of this would be worthwhile if it didn’t actually add value to investors via better risk-adjusted performance. One metric that can be used to determine whether or not the model is adding value is by looking at cumulative alpha following a quantitative rating valuation. For stocks who fall in the most undervalued decile, cumulative ex-post alpha reaches 6% on average 500 days subsequent to a valuation. Comparatively, the most overvalued decile delivers -4% cumulative ex-post alpha on average over the same time frame. Furthermore, since the inception of these ratings in June 2012, the most undervalued quintile has seen cumulative returns of approximately 30% compared to just over 15% for the most overvalued quintile with performance being nearly monotonic along the quintiles.

Morningstar’s quantitative rating systems cannot replace the work done by analysts; indeed, in order to function as desired it requires constant analyst input. However, these systems provide a solution to a vexing question of how to overcome the time and resource constraints implicit in fundamental analysis as well as offer a way to apply a consistent decision framework to a broader universe of investments.

Lee Davidson Quantitative Analyst, Morningstar WMA JOURNAL 17

SLUG

Part Two: Unintended consequences?

In Part I, my starting point was the Investment Services Directive (No. 93/22/EEC) and how EU measures aimed at creating a competitive and consumer friendly market for investment services caused a number of unintended consequences by failing to deliver on its intentions. In this the second and concluding part of my analysis into the unintended consequences of EU financial regulation, I have chosen the Capital Adequacy Directive (93/6/EEC), the Market Abuse Directive (2003/6/EC) and the Deposit Guarantee Schemes Directive (94/19/EC) and ask, could these directives have unwittingly aided and abetted the 2007 financial crisis?

Banking compromise or compromised?

Beginning with the Capital Adequacy Directive (CAD) its intention was to ensure that investment banks had enough capital reserves in the event of a financial crisis. Henceforth investment banks across the EU were required to have adequate reserves to cover their position risk, requirements for debt, equities settlement and counterparty risk, as well as foreign exchange risk and other large exposures.

Traditionally, up until the CAD, retail banks and investment banks had been governed by different regulatory regimes reflecting the differences in their business models.

According to Dale, this opening up of EU financial markets to competition presented European regulators with two problems.

First, host countries needed to ensure banks operating or delivering services in their territory were doing so under proper regulatory standards of prudence.

Secondly, there was a business and policy concern that these very same prudential standards did not discriminate between different types of financial firms leading to an unfair competitive climate. The CAD represented an attempt by the Commission to achieve a competitive environment across the EU between retail banking and investment banking but in doing so it created a number of unintended consequences and failed to deliver 18 WMA JOURNAL

on its promise. The resulting negotiated compromise between the retail and investment banking interest groups meant that the CAD had three major flaws. The first was that the capital adequacy requirements called for by the CAD represented the minimum requirement, as imposing higher requirements was deemed to dilute the solvency protection traditionally afforded to retail banks. At this stage, national authorities could ‘gold-plate’ the directive by imposing higher requirements when transposing the directive into national regulation. However, by doing so they would run the risk of undermining their competitiveness .

The second was that retail banks could now use their deposit base to fund investment banking operations such that the ‘moral hazard’ problem was amplified.

Thirdly, the CAD conferred upon investment banks the same credit standing as that accorded to retail banks. This implied that governments would, if faced with a defaulting investment institution, act as a lender of last resort, arrangements which had traditionally been reserved for retail banks.

More ominously, however, the CAD, in seeking to establish a level competitive playing field, may have provided the seeds of the 2007 financial crisis. Dale put forward the proposition that; given that retail banks would now have a much higher capital reserve requirement for bank loans than those applicable to securitised debt, bearing the same equivalent risk value and maturity date (a factor of no less than times 32 for short-term securities loans) post CAD, banks would have a powerful incentive to shift business away from traditional lending to securitised lending.

Clearly a case of an unintended consequence as he so aptly stated at the time. The logic and simplicity of Dale’s argument in his 1994 article appears, with the benefit of hindsight, prophetic, for this has been the root cause of the 2007 global financial meltdown. Conventional wisdom places the cause of the 2007 global financial crisis on the somewhat nefarious activities of the US sub-prime lending market.

However, had it not been for the fact that EU banks were finding it more advantageous to create value, via securitised as opposed to traditional loan debts, perhaps the severity of the crisis could have been averted.

A prime example of a financial institution which based its business model on securitised debt and became sadly enmeshed in the US sub-prime loans crisis was the UK’s Northern Rock Bank. The next section provides further perspectives on how EU directives aimed at ensuring fair competition and ethical trading may have indirectly contributed to the resulting run on this Bank in late 2007.

The case of the Northern Rock run According to Hall , the run on the Northern Rock, caused by the spillover effects of the US sub prime crisis, demonstrates, how an amalgam of EU measures to facilitate competition, by limiting state asset relief to institutions in financial trouble, as well as, the EU’s 2005 Market Abuse Directive, combined to exacerbate a liquidity crisis into the first full blown run on a UK bank in 140 years. In the past, when a bank had faced a liquidity crisis, the Bank of England would intervene and either act as a lender of last resort or more commonly, put together a ‘rescue’ package, by effectively ‘brokering’ a takeover, as happened during the Barings collapse.

However, during the House of Commons’ Treasury Select Committee hearings into the affair it emerged, according to senior Northern Rock executives, that the Bank of England wanted to extend a liquidity lifeline to a potential takeover candidate (generally believed to have been Lloyds TSB Bank).

That being the case, the executives argued, Northern Rock could have survived saving untold costs to the tax-paying consumer, albeit under new ownership. However, the Bank of England had subsequently issued a statement that Lloyds TSB required a loan of up to £30 billion for a period of up to two years. Consequently, the Bank of England was caught by the EU rules on state aid.

Rules which had been designed to ensure fair competition in a single market. The reasoning being that by giving favoured www.thewma.co.uk

treatment to some businesses, it would harm business competitors, distorting the normal competitive market and hindering the longterm competitiveness of the community.

Additionally, the Bank of England was caught in a labyrinth of enabling legislation, such as the Takeover Code, given a legislative footing in the Companies Act 2006, the EU’s 2005 Market Abuse Directive (which prevents secret takeovers), the insolvency provisions of the Enterprise Act, as well as the Financial Services Compensation Scheme which is the UK’s transposition of the Deposit Guarantee Schemes Directive (94/19/EC).

This EU directive also attempted to facilitate competition by placing restrictions on the use of deposit insurance information in advertisements in order to avoid competitive

“

All these measures conspired to turn a bad situation into a catastrophic run on the Northern Rock distortions in the EU marketplace. In doing so it failed to define the risk adjustment of premium contributions and set the maximum period for depositor compensation at three months.

Hall identifies three base flaws. First, very few consumers in the EU were aware of the deposit protection until the crisis hit and once it hit, given the limited protection, they had every incentive to take their money from the bank. The second flaw we have already covered in our discussion of the CAD and relates to cross subsidies and failure to prevent moral hazard. While the third flaw was brought about by the enforced wait provisions giving investors every incentive to demand the return of their deposits causing a run. All these measures conspired to turn a bad situation into a catastrophic run on the Northern Rock.

Conclusion In the first instance it is suggested that there is compelling evidence that the CAD aided and abetted the 2007 financial crisis.

Ironically this directive was aimed at ensuring that investment banks had adequate capital reserves in the event of a financial crisis. Yet we have seen how, following www.thewma.co.uk

the implementation of the CAD, banks had a powerful incentive to shift business away from traditional lending to securitised lending, the latter being the root cause of the 2007 financial meltdown. Was this not a foreseeable consequence? Did Dale not warn about the dangers as far back as 1994?

Had not the 1929 Crash taught us the lesson that retail and investment banking had to be separate? Had this not resulted in the passing of legislation aimed at separating retail banking operations from investment banking operations? Were Brussels policy makers unaware of these historical events?

Unfortunately my research cannot provide definitive answers to these questions but, if we were to apply ‘the reasonable person’ test, one would be hard pressed not to conclude this was a foreseeable consequence.

The evidence presented by Hall in the case of the Northern Rock provides further evidence of “unforeseen consequences” although maybe not so much as ‘unforeseen’ as foreseeable where it concerns the CAD. The passing of the CAD made securitised lending more attractive to banks than traditional lending. Northern Rock had availed itself of this apparent growth opportunity and made its core business the provision of securitised lending. This left it dangerously exposed to the securitised lending defaults that began to spread across the Atlantic around 2006. Their predicament was compounded when their main recourse, The Bank of England, was blocked from taking remedial action by the EU’s Market Abuse Directive as well as the Deposit Guarantee Schemes Directive. Admittedly the purpose and intention of these directives was not to cause the demise of banks. Could this have been foreseeable?

Given the evidence that I have presented over the course of these two articles, I conclude that there is both compelling as well as persuasive evidence that the resulting spillovers, could have been foreseen.

Moreover, given the failures of EU financial regulation, to create a single European market for financial instruments, this European project continues to be at best a work in progress. Given this track record and the continuing drive by Brussels to regulate our sector I have no doubt that further unintended consequences will occur. Whether these will turn out to have been foreseeable is a matter for conjecture and further debate.

A.L.Danino M.Res LLB, Peterevans WMA JOURNAL 19

CLIENT RESEARCH

CLIENT RESEARCH

Wealth management in the eyes of the investor: the results ComPeer asked 1,000 clients key questions about the service they receive

2013 was a year of major regulatory change for the wealth management, retail fund management and the advisory sectors. The investment landscape is proving more positive although still somewhat fragile, but how are the clients responding to these challenges?

C

omPeer undertook a major research exercise with 1,000 investors, split between high net worth (£1m+ of investable assets), affluent (£250k - £1m) and mass affluent (£50k - £250k), in conjunction with our research partner, EY, last October.

The results were presented at our November 26th conference.

We started by asking what would persuade clients to invest more of the cash they currently hold on deposit and the two strongest replies were ‘a guaranteed return on capital’ and ‘a guarantee that my capital is protected.’ (58% and 57% of the sample respectively) On a related theme 63% of the mass affluent and 77% of high net worth respondents agreed with the necessity to take risks to obtain a good return, however these figures dropped 15-20% when asked if they would be happy to risk losses to achieve greater long-term gains.

When asked to prioritise five reasons to choose a wealth manager; brand/reputation, range of products, investment performance, level of fees and relationship with the firm, investment performance was easily ranked top, ahead of brand/reputation. When segmenting by wealth band, investment performance was deemed most important by the mass affluent (45%), with the figure falling to 37% for the high net worth. The same options were put forward for reasons to stay with a wealth manager and here investment performance was even more dominant, across all wealth bands.

When the investors’ awareness of RDR was tested only a quarter had heard of it and, somewhat disappointingly, this percentage hardly changed when looking at only advisory clients. Amongst the minority who had heard of RDR nearly a third were completely unaware of its objectives. If this suggests communication should be improved, the point was amplified when we asked how many times investors had met their wealth manager in the first ten months of last year. Less than half had

20 WMA JOURNAL

www.thewma.co.uk

www.thewma.co.uk

and there was a significant gap between the frequency clients wanted to meet their wealth manager and the reality.

There has been much discussion of an advice gap being an unintended consequence of RDR and we asked how likely respondents were to invest without advice. Of those who are currently receiving advisory or discretionary services, 39% are likely or very likely to invest without advice. Given they represent some £500bn of assets it is easy to see the execution only sector growing rapidly from its current level of £110bn of assets under administration, particularly as the high net worth segment was the most enthusiastic.

When investors were asked who would pick up the bill for the new regulations two thirds expected it to be themselves, with increased fees being the most likely method used.

A surprisingly high 90% of investors were happy with the reports they received, although 25% admitted there were significant parts of the reports they didn’t understand. This apparent contradiction was due to many of those clients blaming themselves for their lack of understanding. Key areas for improvement

“

A surprisingly high 90% of investors were happy with the reports they received were the client portal, client communication/ education and more formal surveys of client opinions. 40% of those seeking significant improvement were likely to change wealth managers if issues were ignored.

Investors were asked if they thought their wealth manager and the industry as a whole was client-centric. Only 54% thought their wealth manager was and the results were worse for the industry. This key challenge reminds us of one CEO of a wealth management firm who, when asked how relationships with their clients had changed replied “we used to say we were client-centric, but now we really mean it!” We will see how many of his counterparts ‘mean it’.

Mike Levy ComPeer Ltd WMA JOURNAL 21

About WMA

UK INITIAL PUBLIC OFFERINGS

Private Wealth Managers’ Involvement in UK Initial Public Offerings

Who we are The Wealth Management Association (WMA) is a trade association that represents

183 firms

and prides itself on working for the private client investment community.

Of this number 114 members are

wealth management and stockbroking

In May last year Peel Hunt, in association with the WMA, canvassed the WMA’s membership and published a “Survey of Private Wealth Managers’ Involvement in UK Initial Public Offerings”.

T

he genesis for this undertaking came in the aftermath of the successful flotation of Direct Line Group plc (DLG) in October 2012, which at the time appeared (correctly) to indicate a reopening of the UK IPO market, and the differing reactions to the float we received from members of the WMA community. The IPO of DLG incorporated an Intermediaries Offer, which ultimately was allocated 15% of the total issue. The 19 Intermediaries were execution-only and advisory brokers, with the Intermediaries Offer aimed squarely at the self-directed Retail investor. The allocation to the Intermediaries was c.60% of their demand, a positive result even for many major institutional investors in a well-covered IPO. Was DLG (and a number of subsequent IPOs) therefore a positive statement of fact in favour of active Retail participation in major UK IPOs? What was not to like? Unfortunately for the WMA’s membership, many discretionary managers, who had placed orders for stock, found their allocations were materially lower than the c.60% received by self-directed investors. Their allocation came from the Institutional Offer and, in many cases, they found themselves treated as marginal investors and received de minimis allocations. This gave rise to one of the major themes uncovered by the survey, that of an inconsistency as to how the Retail investor base, within the investor class itself, is treated and classified by the market at IPO. Is the consistent involvement of the entire WMA community in UK IPOs achievable?

Since the May 2013 survey the IPO market in the UK has, encouragingly, seen a number of larger IPOs include a Retail Offer and overall volumes of companies coming to market have accelerated in recent months.

In particular, of course, in October we had the IPO of Royal Mail Group, with an offer to 22 WMA JOURNAL

the public via Intermediaries and the internet, and the huge public appetite for the deal reminded the market of the vast potential for Retail demand in the UK. Immediately after the flotation of Royal Mail, the WMA and Peel Hunt did another survey of the WMA membership, concentrating on their experiences in Royal Mail and asking “Does anybody know who ‘Sid’ really is?” The survey again highlighted the variables in the Retail community and between firms with differing types of underlying Retail clients.

Whilst this level of inclusion in recent IPOs is clearly to be welcomed, Retail involvement in the likes of DLG and Royal Mail was in many ways to have been expected. The real test will be the continued involvement of Retail in UK IPOs as the market furthers its recovery, particularly in less obviously Retail-centric companies. And will Retail involvement via Intermediary Offers extend beyond self-directed investors to include discretionary managers? This highlights the second key theme uncovered by our surveys – the lack of consistent involvement of Retail

“

The default position of many bookrunners is that this segment of the investor base is too fragmented and cumbersome to deal with investors in UK IPOs over the longer-term and the recommendation of a mandatory retail tranche for all IPOs above a certain size.

In the absence of a mandatory retail tranche, discretionary fund managers have no choice but to be reliant on the Co-ordinators/Bookrunners of UK IPOs to solicit and accept their demand and then hope that this interaction will be rewarded with sufficient allocations to make their involvement worthwhile. The default position of many bookrunners is that this segment of the investor base is too fragmented

and cumbersome to deal with effectively, particularly in a relatively dynamic situation.

Aside from IPOs, Bookrunners tend to see the difficulties of interacting with private client wealth managers being particularly acute when the equity raising transaction is confidential, as with most secondary fundraisings, and key investors need to be made ‘inside’ ahead of public announcement.

Is there anything that discretionary managers can do to become more ‘relevant’ to bookrunners and seen as a source of material, accessible demand? For many of the larger banks and brokers acting as bookrunners, private client wealth managers are not part of their regular investor client base and they do not understand them well.

Many see them as lacking in scale, being a small source of potential demand, and being internally fragmented in terms of who controls AuM and, therefore, lacking the ability to deliver a single significant order. They fail to realise that an increasing number of managers now have centralised investment processes that allow dialogue with a central figure within the fund manager who can disseminate information and collate demand.

What many also fail to see is not only the significant assets managed by an increasing number of individual private managers but that in aggregate, and with determined aggregation by an experienced bookrunner, Retail demand can be materially accretive to the shareholder register at IPO. Thankfully, after a number of fallow years, the level of IPOs in the UK is increasing.

This is good for the UK equity market, good for Retail investors and the private wealth managers and brokers that service them, and, ultimately, good for economic growth.

Pleasingly a number of high profile floats have included dedicated Retail tranches.

However, what remains to be established and proven is the consistent involvement of the entire WMA community and consistent Retail involvement across UK IPOs as a whole.

Luke Simpson Corporate Sales/Syndicate and Investor Relations, Peel Hunt LLP www.thewma.co.uk

firms that deal directly for the private investor.

The remaining 69 are

associate members who provide

professional services to our member firms. If you buy or sell securities at

Our history

any time, you are likely to deal with a firm that is a member of WMA. Today WMA members reach more than 4 million investors,

manage in excess of £510 billion of the country’s wealth, carry out more than 20 million trades a year and operate

Stock Exchange in 1990, APCIMS’ mission as a trade

in more than 580 branches across the UK, Ireland,

association was to represent the interests

the Channel Islands and the Isle of Man.

of stockbroking firms which specialised in

£ 1994

Formed out of the London

1990

providing services for individual investors, balancing the powerful influence of major investing institutions.

In 1994, the membership grew to include more investment managers who, like stockbrokers, deal in, advise on, or manage direct investment in individual securities for personal and other non-institutional investors.

In 2013, APCIMS members voted

Our objectives

to change their name to the Wealth Management Association to better

i

To ensure that the interests of our members

reflect what their members do.

are appropriately voiced and represented; To provide information and assistance to our members across a wide range of change encompassing regulatory,

2013

market and business issues; To communicate industry change to our members; To liaise with governments, regulators, financial institutions and all participants in financial services; To lead the debate in Europe on retail investment work and the overall development

What we do WMA Member firms

of the European securities industry.

Client Services European Authorities Financial Conduct Authority

WMA liaises between other bodies such as legislators, policy makers and regulators and our member firms and seeks to ensure that changes from the UK and Europe are appropriate and proportionate for the investment community and their clients.

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22 City Road Finsbury Square London EC1Y 2AJ Tel: +44 (0)20 7448 7100 Fax: +44 (0)20 7638 4636 www.thewma.co.uk Twitter: @wma_uk Members: enquiries@thewma.co.uk Non-members: info@thewma.co.uk