History Policy Papers

How Regulation is Damaging Competition in Asset Management

IIMI publishes “How Regulation is Damaging Competition in Asset Management”, highlighting the negative affect that an increasing burden of regulation is having on the industry.

  1. The UK SME asset management sector has traditionally been vibrant and strongly growing, but it is now stagnating, as new start-ups cannot support the financial cost resulting from increasing regulation.
  2. Boutique asset and wealth management firms find the burden of regulatory compliance increasingly onerous.
  3. New financial regulations from the EU and UK are applied equally to the very biggest and smallest asset management firms, disregarding their ability to shoulder the consequent financial and legal burdens.
  4. If financial regulation is not imposed more proportionately on large and small asset management firms, the NCI is convinced that many fewer start-up firms will come to market. This arrest of competition will damage all, but especially the consumer, as choice will become much more limited.
  5. The legal complexity of and the potential financial punishment for infringements of regulation pose massive obstacles to the growth of competition in this sector.
  6. A new ‘priesthood’ – compliance officers – has emerged from the financial crash. As the regulatory regime becomes ever-complex and continually evolves, and the scale of potential punishments so damaging to small firms, the temptation is for compliance officers to engage in ‘gold-plating’ to avoid any possibility of failure to comply.