Chris Cummings speech to the IA Annual Conference 2022
It is such a joy to see you all here today. I suspect I’ve started every IA annual conference by saying that, but today is particularly special as this is the first time the industry has been gathered like this since 2019.
The joy of bringing everyone together again is, sadly, somewhat offset by the times we are living in, and the challenges faced by our clients, by investee companies, and by nations around the world.
Emerging from the pandemic there was a real sense of optimism and business confidence looked to be on the up. But that was quickly eroded as we faced up to the brutal invasion of Ukraine, and are now seeing the toll a high inflationary environment can have on households here in the UK and globally. We all know that our industry is truly international in its mindset and activities - and our role in helping investors secure a better future has never been more important than at times of economic stress and deep political uncertainty.
Our industry – and the businesses and customers that we serve – are facing some tough tests. Not for nothing is today’s conference entitled ‘Next generation investment management’ - we truly are looking at some generational shifts.
We are all aware of the spectre of inflation and a deeply concerning cost of living crisis. We have a particular responsibility to our customers as we shepherd their hard-earned savings through this time. And we must be mindful of the impact that tough times may have on the staff and customers of our investee businesses, too. Our industry’s response through the pandemic showed resilience, patience, and a commitment to preserving client interests while supporting investee companies - but we now face different challenges that again will require the industry to step-forward and showcase its ability to deliver for clients.
Questions will be asked of our ability to deliver real returns in such an inflationary period. Our desire to modernise markets, reduce friction, and cut costs will be focused on. And so we will need to move faster to innovate, focusing on the areas that matter most: improving the UK as a venue for IPOs, bringing new investment vehicles and approaches to clients, ensuring we meet the demand for greening the economy, and of course by working with government and regulators, turning-round the UK’s waning attractiveness and rebuilding our global competitiveness.
As the UK reshapes its identity on the global stage, we need policymakers to work with the industry to create a business environment that spurs innovation and prioritises economic growth. In our competitive world, we need a policy framework that actively promotes the competitiveness of the UK as a place to do business - to save, invest, launch new companies, and attract investment.
We need a regulatory system that, at its heart, seeks to protect the UK’s citizens, while also working with the great firms in our industry to ensure those citizens are better-off in retirement. And which recognises that the UK’s position as the pre-eminent global investment management centre is a jewel in the nation’s crown and one which needs to be protected not lost due to excessive, costly or ill-judged regulatory actions.
I very much hope that the Financial Services and Markets Bill, that we still hope to see soon, will help provide the framework to deliver on these vital ambitions.
In particular, we will be supporting the work that this Bill must do in giving our regulators an objective to promote competition and economic growth. This may come as a Secondary Objective - but “Secondary” cannot mean “Optional” as, in large part, the regulatory environment will determine the industry’s success as we seek to innovate, respond to client demands, and modernise. This mindset underpins so much of what we want to achieve.
Let me put on record that I don’t want to see weaker regulation. I want effective regulation, which supports our customers and underpins our global reputation for excellence and stability.
And although the UK has left the political establishments of the European Union, we remain committed to serving our clients and working with investee companies across Europe in their efforts to transition to a greener, more sustainable economic future. Despite Brexit, Europe continues to be our largest international market for cross-border investment services, with members present in every single EU Member State, and managing some £2trn here in the UK. Given the breadth and depth of this activity, it is critical that we maintain an open and meaningful dialogue with our European partners, offering shared solutions to shared challenges.
We face a rapidly changing political outlook at the moment. But our central message to all politicians is that the investment management industry is at the heart of economic growth and the prosperity of the UK: helping people invest wisely, attracting companies to list here, and financing projects that will renew infrastructure and help to green our nation’s economy. We need our leaders and our regulatory system to both reflect our leading place in the world, and support it as it develops.
We need a government which continues to help businesses to help society. The spirit of policies such as the super-deduction which boosted investment exactly when it was needed must be maintained. And we need government to keep up with our changing world. The Treasury, FCA and the Investment Association came together with other stakeholders to help widen access to illiquids through the Long-Term Asset Fund. Progress has been made but it has been slow going and lessons need to be learnt about the importance of speed to market in a competitive environment.
Turning to today, our industry too must innovate for this changing world. I am immensely pleased that as part of this we are today publishing a truly ground-breaking paper, Investing for the Future.
Our industry has been around for 150 years. But technology is changing more rapidly than we could have imagined just a few years ago; and so too are investors’ expectations.
This report seeks to help firms, regulators and policymakers explore the potential futures that technology can unlock and map out the improvements that can be unleashed. Three scenarios are explored with other options considered:
- Will funds continue to adapt bit by bit to the challenges and opportunities coming up?
- Or will a more innovative evolution take place to connect us better with our customers?
- Or will funds transform into a different kind of product altogether?
No-one knows for sure what the future will bring. Even Bill Gates apparently once said that “640K are enough for anyone”.
In the report we are calling for government and regulators to work with our industry to help the UK catch-up with other jurisdictions who have made better progress in facilitating innovative investing approaches – and then set the pace globally.
- We need a partnership with between policymakers, FCA and industry based on innovation specifically in the area of decentralized finance. While Bill did actually say that “innovation is the most powerful force in the world” it needs actions to bring about vision. For instance, top of many minds is establishing the framework for tokenised funds to operate in the UK.
- We need the perimeter of regulation to change, especially in the field of crypto. It should establish the “rules of the road” for crypto-finance and act swiftly on addressing the perimeter issues with unregulated firms.
- And we need regulators to keep up with consumer need, in particular by addressing the advice gap which currently leaves many without proper support. This is also the moment to address the problems we all seek with disclosure and introduce new modern approaches.
Our commitment to help firms get the most of the tech revolution we are witnessing is unwavering. We have some 150 FinTech members at the IA, making us easily Europe’s biggest buy-side FinTech hub and of course we have our outstanding FinTech innovation programme designed to help members explore what buyside tech, wealth tech, prop tech, and reg tech solutions can offer them. We also have our dedicated FinTech worksite in Birmingham which was officially reopened last week following the pandemic. Exciting times and do talk to us about getting involved with the work of IA Engine, our FinTech enterprise if you want more information.
We have four panel discussions for you.
In a moment, we are going to explore what I suspect is the most important thing we can think of, the Next Generation Consumer. We will be hearing from those consumers themselves – people who have found the industry in the last few years and will set out first hand what they expect from us. A truly exceptional panel, including our regulator, will then look at how we meet and exceed these expectations.
Later, we’ll have the Next Generation of Talent. This industry is only as good as our people, so we need to make sure that we have the right people, with the right skills, joining us at all levels. We’re going to hear from some colleagues who are right at the start of their careers with us, alongside those with a little more experience to look at how we find, train, and keep them with us.
After lunch we will look at Next Generation Investments. Funding businesses and infrastructure for the long term is at our core. We now know that long term success is balanced on those projects delivering for the environment and for society, as well as short term financial considerations. There will be much to unpack in this crucial topic.
Finally, I’m immensely pleased that some of our industry’s most senior leaders will be joining me to look at the biggest strategic issues facing our industry and the wider world, and our role in solving them.
Our industry is fundamental to our economy. That has long been recognised by our political leaders, and I’m immensely glad that two of them will be speaking to us today:
- Jonathan Reynolds, the Shadow Business Secretary
- Lord Callanan, the minister responsible for corporate governance
This is all made possible by our sponsors – thank you, K&L Gates for your support year after year. We are immensely grateful. And thank you also to Aviva, for so generously hosting us today.
I will hand over to the IA’s Chair Keith Skeoch in a moment. Before I do, I want to mention that this will be Keith’s last Annual Conference with us as Chair. Keith’s ideas, expertise and support have been of immense value to me, and I know many others here today. We will feel your loss, and I know that we will still value you as a true friend of our industry.