Gina Miller’s campaigning relationship with the European Union precedes, by many years, her court battle to make Prime Minister Theresa May seek parliamentary approval for Article 50. It was the EU, not the UK she points out, that delivered the transparency that is shining a light on the investment management supply chain through Mifid II and Priips. While others might challenge the view that the UK will seek to gain competitive advantage by lowering governance standards post-Brexit, for Miller the link is clear.
She recalls a moment back in 2012, in the car park at the BBC following a Moneybox interview with then Investment Management Association chief executive Richard Saunders, when the penny dropped that it was the EU that was the key to progressing her investment costs and charges transparency campaign, not the UK.
“We had been campaigning since 2008 and had amazing people like David Pitt Watson and Professor David Blake at Cass Business School on board, but we were not getting anywhere,” says Miller. “Then, in the car park after another radio show where we had appeared together Richard Saunders said to me ‘it’s not down to us, it’s down to the EU’. And suddenly a lightbulb went off in my head and I thought ‘we need to start lobbying in Europe’. So we did. We didn’t belong to an association, we didn’t have an agenda, we were a very small business. So we worked on Article 24 of Mifid, Priips and the shareholder directive, and that is where the change came from,” she says.
The Brexit issue that made Miller most famous is still far from being concluded, but her transparency work, for which she first
became known in the investment management community under the banner of the True and Fair Campaign, has achieved concrete results. The implementation of Mifid II and Priips from 3rd January of this year have placed a string of transparency obligations on financial services providers and distributors, that the industry is currently in the middle of coming to terms with. Mifid II may now be part of the law, but Miller, who founded investment manager SCM Direct with her husband Alan back in 2009, sees enforcement as the next big challenge.
Mifid’s consultant challenges
“Now Mifid II is legislation it is extraordinary that it is not being adhered to. We are currently completing a dossier looking at how Mifid is being implemented. And all the things we are finding is that fund managers are reporting the data, but the people who are client facing, distributors, they are not passing it on. The consultants, the advisers, they are not complying.
“Since 3rd January asset managers are giving us the data – not all of them, but it has been pretty good. The difficulty is, whoever is at the end of the chain is the one who is going to have the conversation with the client. The conversation with that client who thought on the 2nd of January that they are paying 1 per cent or 1.5 per cent and then on the 4th of January realise they are paying up to 3, 5 or in some cases 7 per cent,” she says.
“I have worked with consultants in the past who have said we do not know what we should be asking for, and I’ve worked with them to create templates. Well they cannot say that anymore,” says Miller, although she accepts that for the moment, when there is no uniform way of delivering the volumes of data now being generated, comparing apples with apples and communicating the information is hard.
“We were not successful in getting a formula or a format. So some people are doing it, but they are all interpreting it in a different way. There is no definition of portfolio turnover rate, which the Investment Association said they would do two years ago. The FCA has failed in giving technical guidance on what that should look like,” she says.
So won’t the work that Dr Chris Sier, who is currently chairing the institutional disclosure working group on agreeing a template for disclosure of costs and charges address this issue?
“Chris is great – his work is around the institutional side. It is not retail. He is coming up with the data points that are required, but it is impossible for the ordinary punter to understand.
“So it is a question of how you distil that in a uniform format. It’s like a car, do you want to know every single thing about it, or do you want to know the 0 to 60, the emissions and the price?” she says.
So has Miller’s own firm, SCM Direct, had to put up its prices? “It looks as though our prices have gone up because we did not have the transaction costs of the ETFs that we hold and now we have that. So it looks like our prices have gone up by about 1.2 to 2 basis points for ETFs, depending on which one it is. And it will be more for other funds. But we are finding where there is a second layer of charge in a fund of funds, we can’t find that out,” she says.
Miller also questions provider compliance with the requirement in Mifid to notify some clients of a 10 per cent drop in their portfolios has been implemented yet.
“That could have happened last month, and I wonder if anyone is actually in place yet where they have got the systems automated and ready to go,” she adds.
Miller thinks while the investment management industry will be markedly more transparent, and more efficient, going forward, the move from a pre- to a post-Mifid II world presents a potential headache for regulators and heightens the chances of a retrospective class action against asset managers.
“Look at bundled research costs – you had the inflated charges where the asset managers got a kick-back. But also, if you are paying an AMC, isn’t a fundamental part of what you are paying them for research? I have never understood why you end up paying twice,” she says.
She adds that the fact that people are now seeing a higher price for something that was exactly the same as they were getting before January 3rd presents a potential for actions to be brought.
“I wonder if the FCA is worried about misrepresentation and fraud. Because the product itself hasn’t changed, but the price you are paying for it has. But then if you look at the last 10 or 11 people who have gone through the revolving door at the Treasury at a senior level, they have gone back into the industry. So they are not strong enough. And I don’t think going forward they are going to be strong enough in policing Mifid and Priips,” she says.
For Miller the Government’s commitment to the implementation of transparency measures is inextricably linked to Brexit.
“I have heard that the reason they are not enforcing it more forcefully is because we are heading towards no deal on Brexit, or hard Brexit, so we won’t have to do this. Really? If you want to plug and play you will still have to do this. There is no way out of it,” she contends. I
On the subject of the impact of Brexit on the Square Mile, Miller is not in the Project Fear camp. “We have so much skill and such an ecosystem around financial services that whatever happens with Brexit, it is not going to change overnight. It is going to take a long long time. But it will be significant if we miss passporting, because it’s not just about us passporting out. You have to remember that of 13,500 passports there are 8,000 inbound ones. So for example there are 107 EEA banks, and as far as I am aware, none of them have approached the FCA about their license,” she says.
She also argues the financial services sector should not be complacent in thinking it will be able to pay to play in the EU. “Don’t forget Switzerland have been asking for that for years. And the head of the ECJ said last year that because of the Swiss rejection he doesn’t see how the UK can get to pay to play. The EU is not just negotiating with the UK, but it has got the Swiss in the background as well. Whatever we get they are going to want, and they have tried for four years and been turned down.”
Not surprisingly, Miller supports the Competition and Markets Authority investigation into investment consultants.
“I have always been suspicious of the lack of separation. People going in and saying these are our products and this is what we recommend. There is a conflict there and you should be doing true beauty parades, but it is very difficult but if you have got your own product.”
Brexit – where next for the country?
Some might argue panic at the lack of apparent progress on Brexit is unwarranted, arguing European negotiations are almost always concluded at 11.59pm on the night before the deadline. But Miller believes a lot of people are deluded as to how little time they have left.
“If it’s a no deal Brexit then there is no transition – that is something that I had to explain to an MP this morning,” she says. “The transition is the transition to the deal that you have agreed. You can’t negotiate the future relationship until you are a third country and that’s because of the functioning of the EU under Article 218 of the treaty of Lisbon.
“The most common phrase I hear from people is ‘we will have to wait-and-see’. But if everyone is playing that game nothing is it going to get done.”
So with no apparent movement on any side, how does Miller see the coming months panning out?
“We are in a crucial six months up to October, when the UK has to make its decision.
On the domestic front, the May local elections are going to be very important. And then we will see if there is appetite for what we are calling a people’s vote in the autumn. I believe there is going to have to be another vote,” she says, arguing neither the Conservatives nor Labour want a General Election this year.
“Corbyn is going to have to come fully off the fence at some point but it does not sit well with parts of the Party, and the Conservative Party are in a similar situation too. So you have two political parties that are at war with themselves, so actually a people’s vote gets them off the hook.
So would this be a second referendum?
“It can’t be the same question, in or out. It has got to be a vote on the options. A referendum, people’s vote, whatever you want to call it. And I totally disagree with everyone who just says that if you vote to remind you just withdraw the article 50 letter and remain. Because that is not going to help anybody. At the end of this process we need to be one country again, not divided.
“The only way the two parties get out of the situation they are in there is by not taking the decision themselves. And then that has to be accepted, and the country would have to move on,” she says.
Miller has been under intense personal pressure because of her stance – pressure that has been intensified by her gender and ethnic background. Meeting at her office, it is telling that SCM’s name is the only company not mentioned in the lobby of the building. She has received numerous death threats and when she travels outside London has to notify local police authorities. So is the pressure getting worse or better?
“I’m always a fighter, but I don’t go anywhere. Socially we don’t go out quite as much, and if Alan and I go outside to the theatre we have a discussion about who we think is going to be there. Every part of my life has changed. It is just the way we live now, but if things ever get really really bad I will always have to put my family first.”
A LIFE OF CAMPAIGNING
Miller’s first experience of campaigning was as a mother in her mid-twenties, on behalf of her special needs daughter. “I was trying to get a special needs statement for my daughter, which they didn’t have back then. Then I did a campaign for National Childbirth Trust (NCT), trying to get shops to move sweets away from tills. And I also campaigned to get the level of sugar in Baby Ribena reduced and get the product clearly labelled. It’s become a habit and is now part of my personality that when I see something is wrong I have to do something about it,” says Miller.
Miller traces her campaigning gene back to her father, who was a campaigner in her native Guyana who went on to become the country’s Attorney General. “Back then we had a dictator called Forbes Burnham and my father was instrumental in setting up a political party, and fought for social justice, so I grew up around that,” she says.
Miller is also threatening to sue the Government over advanced payments of the £1bn pledged to the Democratic Unionist Party that have been made without a parliamentary vote, arguing ministers are acting ultra vires. “We sent a letter last year saying that this sum of money is not a tidying up of the estimates, it’s a discretionary payment, and there should be an equalities assessment. They have made payments of £20m and £30m, one for the emergency funding of the NHS – but what about the NHS in the rest of the country? And they said they will seek retrospective permission and the tidying up of estimates. And we said what about the rest, and they sent a letter saying they want an extension. So they don’t even know their own position on this.
She is also threatening to sue the FCA for failing to enforce Mifid, arguing it puts her company at a competitive disadvantage.