February 16, 2018
Our Weekly NewsletterContact
Across Instinctif Partners’ Financial Services team, we are always keeping an eye on the key developments taking place across the sector to evaluate their impact on the many businesses we work with. Here we share our picks of the week’s most interesting news, and our expert views.
New EU rules mean investment companies and wealth managers must now provide more information about the fees they charge clients. So far, the requirements only apply to new customers, but from next year existing investors will also be given insight on what it costs to have their money managed. (From The Daily Telegraph, 11 February 2018)
New apps are emerging to financially educate children on saving and budgeting. As the era of the cashless society arises, parents are being given new ways to help their offspring manage their pocket money. Creating positive financial habits from a young age is the aim, and app developers look like they are keen to target the first generation to ditch the piggy bank. (From Financial Times, 9 February 2018)
Forecasts estimate that by 2020 female millionaires will overtake males in the UK, with 66% of the world’s wealth belonging to women. The shift means the historically male-dominated financial services industry needs to adapt and encourage women to take an active role in the management of their finances. A more risk-averse approach, that favours transparency and simplicity in investment products might be the key to attract more business from females in the near future. (From The Times, 10 February 2018)
Lloyds Bank has announced this week that it will set a formal target for the number of ethinic minorities it employs in senior posts. The move is a first for a FTSE-100 company and could well set the mark for other businesses to follow suit, as calls for targets of BAME representation in boardrooms become louder and harder to ignore. (From Sky News, 11 February 2018)
Fintechs are joining forces, as app-only bank Starling pulls together the offerings from various other fintech players all under one app. The move means that customers can access all their financial needs in one place – including current accounts, mortgage advice, pensions management and travel insurance. Has the future of Millennial financial management arrived? (From Daily Mail, 13 Februay 2018)
Time for active managers to change their tune
Today’s passive investment trend is not just beating active management, but pushing it towards extinction. In the PR war, asset managers’ criticism of ETFs is sounding too much like sour grapes, so in order to come on top, active managers would be wise to change tactics and quickly adapt to the new framework.
Statistics don’t lie: Active management has continued to see funds hemorrhaging towards passive funds, to the point where some are now predicting the inevitable demise of the once powerful active manager.
What is now apparent is that the ‘actives’ defence is lacking. Managers swerve from angry attacks of investors’ ignorance to poorly backed-up claims that we have reached “peak passive”. All the while, the money keeps pouring into passive investment vehicles, such as ETFs.
Concurrently, few active managers are addressing the multi-million pound elephants in the room of poor active returns, which, coupled with newly transparent and (at times) eye-watering fees, makes them sound like sore losers.
The time might have come for active managers to fight back with some common sense messaging that casts their craft under a more positive light – the recent market jitters have spun out legitimate concerns about the effect of ETFs on the wider market and the rise of more exotic ‘juiced up’ passive vehicles using derivatives could spell the end of the passive decade.
The key to winning the argument will be for active managers to face up to their shortcomings while simultaneously using smart communications strategies to put a coherent argument across for good, cost-effective active management. Passive vehicles are not perfect and it may be that more volatile times need active management nous. Managers must now start to eloquently argue their case.