The new group will be formed over the summer with a launch planned for autumn, when the full IDWG report, including templates, will be released. This pause in the publication of the new templates is to allow the new monitoring group to be established, to enable it to act as a Helpdesk and information hub for organisations seeking information on how to incorporate the templates into their processes.
Unlike the IDWG, the new group will not be overseen and facilitated by the FCA. The IDWG was chaired by Dr Chris Sier, supported by co-deputy chairs Jeff Houston and Gregg McClymont. It is not yet clear whether Sier will be invited to sit on or chair the new body, although transparency supporters are understood to back him holding a role within it.
Aon has thrown its weight behind the new templates, saying that it will adopt them and will expect asset managers it uses to adopt them too.
One of the key findings of the FCA’s 2017 Asset Management Market Study was that institutional investors find it difficult to get the necessary cost information to make effective value assessments. The IDWG was established as a stakeholder working group with an independent chair, with the objective to “gain agreement on (cost) disclosure templates for asset management services provided to institutional investors”.
A range of experts was selected and invited to join the IDWG with support from several observers and a secretariat provided by the FCA. Approximately 40 per cent of the IDWG was drawn from the institutional investor community and its advisers, 40 per cent from the asset manager community and 20 per cent from independent experts with a range of backgrounds and skillsets.
A statement from the FCA says: “We welcome the recommendations made by the IDWG. We believe that the group has made significant progress in tackling the issues we found in relation to institutional disclosure as part of the Asset Management Market Study.
“We will now work with interested parties to begin the process of supporting these recommendations. We will continue to work with investor and industry representatives as well as other regulators with an interest in this space.
“We will reconsider the issue of disclosure to institutional investors in the future if we have any reason to be concerned about the effectiveness of how the IDWG recommendations have played out in the market.”
Aon global head of performance and cost transparency Neil Smith says: “The imminent launch of these cost templates is another positive step in allowing institutional investors a clearer assessment of the value generated by their asset managers. As the use of the templates is voluntary we believe investment advisers have a big role to play in ensuring their initial and continued success and particularly how advisers respond to non-compliant asset managers.
“The current procedures – as highlighted by the IDWG – within the Local Government Pension Scheme Code of Transparency of non-compliance, which results in non-renewal/inability to tender for contracts, is an approach we fully expect to gain wider traction. However, based on our own analysis, we anticipate that the vast majority of asset managers we work with, will adopt the templates – and led by those based in the UK.
“The ability to access their costs information for the first time in a consistent format, across all asset managers and all asset classes, is just the first step for investors. The proposed level of information has never been so broadly available before. Understanding the importance, magnitude and value derived from the various cost elements will be important to ensure discussions are focused in the right areas.”
“In our experience, institutional investors have struggled to gather and interpret the costs incurred in the management of their assets. As a member of the IDWG, Aon has seen at first-hand the hard work and co-operation among different stakeholders to standardise which costs are disclosed and the way in which it is done.
“This standardisation, combined with more granular information, means we are confident that the transparency of all costs to investors will be improved significantly. Aon will be adopting the IDWG recommendations and will set the expectation to adhere to them for all current and prospective asset managers who invest our clients’ assets. We are sure that clearer and fairer discussions between clients, their advisers and asset managers will follow as a result.”
