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8th September 2010

Distributor Influenced Funds Open Industry Meeting

TISA Distributor Influenced Funds Open Meeting

8th September 2010

FSA concerns re DIFs

· Poorly designed and often "me-too" · E Economically sub-scale, hence high TERs i ll b l h hi h TER · Debatable investment management quality · Unresolved conflicts of interest in the advice process · Undisclosed financial and non-financial incentives for individual RIs

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8th September 2010

Distributor Influenced Funds Open Industry Meeting

Consistent investment advice process - options

Panel Lists

· Central research · More consistent than individual adviser choice · FSA favoured approach ------------------------------· Too often lists are geographical / sectoral leaving individual advisers to handle portfolio construction · Not all funds available on all platforms/life companies · No ongoing portfolio review or update until next financial planning review

Discretionary Fund Managers

p y y · Devolves responsibility away from individual advisor · Portfolio reviewed and updated on an ongoing basis --------------------------------· Poor portfolio construction over emphasis on UK equities · High minimum portfolio size · High cost 0.75 - 1.25% · Little proper disclosure of charges or performance attribution · Client CGT issues · Limited availability on platform / life companies

Distributor Influenced Funds pp · Can be applied consistently for all clients irrespective of size · Can be made available through platforms · Allows integration with CGT tax planning · Asset management VAT exempt · Performance and costs fully disclosed ------------------------------· Conflict of interests · Need for scale · Attitude of FSA

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Distributor Influenced Funds - definition

· DIF is an FSA coined term, but never properly defined · P Potentially i l d any vertically integrated financial i ll includes i ll i d fi i l services business that includes manufacturing and distribution, e.g. most of the major banks and life companies with asset management arms · Pressing need for a commonly applied set of standards

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8th September 2010

Distributor Influenced Funds Open Industry Meeting

Distributor Influenced Funds - a route forward

· Industry Code of Conduct covering

- Operational and oversight of funds - Setting and oversight of investment mandates - Disclosure of financial interests and clear Conflicts of Interest policy

· Requires formal endorsement and review by FSA

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David Moffat 01268 444865 07799 777774 [email protected]

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