IMA launches fresh attack on struc prods
IMA chairman Robert Jenkins has reignited the trade body's attack against structured products, questioning whether regulators are "asleep" on tackling the industry.
Speaking at the FSA’s Asset Management Conference today, Jenkins says the nature of the ‘deceptively simple but complex’ products is at odds with traditional investment industry values.
His comments follow stinging criticism from IMA chief executive Richard Saunders last week, who said structured product providers' promotional material "should not be taken at face value".
“They (structured products) carry issuer risk, liquidity risk, and a level of costs which the retail buyer may not fully understand,” Jenkins says.
“Yet this is an area largely free from regulatory oversight and competes directly with a highly regulated traditional investment industry where agency status is central, transparency of fees and holdings de rigueur and government pressure to raise levels of treating customers fairly foremost.
“Is someone asleep at the watch?"
Jenkins urged regulators to apply the lessons learnt from the current banking crisis to the investment arena.
This latest broadside has yet again angered providers, who describe the comments as "provocative" and "fundamentally misguided".
Chris Taylor, chief executive at Blue Sky Asset Management, says he is due to meet IMA chairman Richard Saunders to discuss the IMA's stance on the issue.
"It is not in investors' best interests for biased industry professionals to conjure up dogma when none is needed," he says.
“We concur that there are mediocre structured products out there but, in the same way that wealth management advisers screen the traditional mutual funds world – where they select 150 funds from a universe of 2,000 – the same process should be applied to the structured products arena.
"Wealth management firms should select the best from both worlds and align them in an optimal planning process for clients.
"That’s where we think the IMA is not only being provocative but fundamentally misguided in its assertions.”
Richard Saunders's original criticism led to an angry response from providers. It also prompted others to point out that dozens of IMA member firms invest heavily in structured products.
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