The first virtual EY Funds Forum took place on Tuesday, 1 December with 316 thought leaders and decision-makers from the wealth and asset management industry joining us to discuss and reflect on the industry’s biggest trends and priorities. Read on for a summary of the event or click through to watch it back in its entirety.
Opening the event, EY’s Wealth & Asset Management Leader Lisa Kealy acknowledged the changed circumstances and the fact that, as individuals and as an industry, 2020 has caused us all some pain. “But that’s only part of the story,” she said. “This extraordinary year has also reminded us of what’s important, it’s shown us how resilient we are, it’s shown us what we can achieve, and it’s demonstrated how quickly we can change. The environment in which we operate is probably evolving faster now than at any point in our industry’s history, making it even more important that we take time to reflect, to reassess, to restructure, and to reconfigure our business models and our strategy.”
Commenting on the significant changes on the horizon, ranging from political to regulatory and supervisory reforms, Lisa said: “In short, our industry is being asked bigger, more demanding and more detailed questions than ever before, and that in itself is a sign, not only of how far we have come, but of the importance of our industry, the need for our industry as a major player to continue the journey we’re on. But reframing the future is about more than responding to politics and regulation. The asset management industry in Ireland and elsewhere is working to seize the opportunity that always arises from disruption. The appetite for change from within the industry, and among the investors we serve, has never been greater and as we look to the future, next and beyond, let’s build it back better.”
Amongst other priorities, such as leveraging technology and embracing sustainability, Lisa stressed the importance of building closer relationships with regulators and legislators, in Ireland and in Europe, and engaging more forcefully with the European institutions. This led nicely to the address by Sean Berrigan, Director-General, European Commission DG FISMA, who shared some invaluable insights from the European Commission.
His wide-ranging speech, which you can watch in full below, covered the future EU asset management regulatory landscape, embracing the forthcoming investment firms regime, the future of delegation, the immediate and pending revisions to MiFID, AIFMD, and implications of Brexit.
Colm Kincaid, Director, Securities and Markets Supervision, Central Bank of Ireland, followed with some perspective from the Central Bank of Ireland on the funds industry’s role to protect investors in this time of change. He stressed the urgent need for financial products and services to become more environmentally sustainable and highlighted the EU regulatory changes that are in train to support this outcome – including the Sustainable Finance Disclosure Regulation (SFDR), which comes into force on 10 March 2021.
Colm also urged firms to make the necessary progress in implementing the framework, to enhance their capacity to deal with the challenges ahead. He said: “We are in a period of great change and regulated firms have a responsibility to help investors navigate that change. Whether it be battling climate change or the impacts of Covid-19, or dealing with the change to the landscape from Brexit, the key to firms discharging this responsibility is to be well-resourced, well organised and well run. The regulatory framework provides a map for firms to achieve this, but firms have got to start applying it in a way that is more prudent and risk oriented and less focused on delineating the minimum requirements of the law. I hope, and expect, that when we next speak about change at this event next year, a better implementation of the CP86 framework is one of the changes we are referring to.”
Click through for the full text of Colm’s speech.
The regulatory theme continued with an industry leader’s panel discussion, Reframing the future by embracing the now, which considered how the direction of travel set by ESMA and regulatory authorities might influence the future evolution of asset management.
Moderated by EY partner Fergus McNally, the discussion centred on three key topics: CP86 – substance and delegation; leverage and liquidity, and investor outcomes – value for money, ESG and product appropriateness.
Paul Traynor, Partner, Wealth & Asset Management Consulting, EY Financial Services, commented on the fact that the industry is changing, and as a consequence, there are growing pains – but the overall outlook remains positive.
He said: “There’s no doubt that we’re becoming systemically important, if we’re not already systemically important …and with that comes risk and oversight, and a change in focus. There was a time when the focus was very much around asset protection – and asset protection remains crucial but it’s kind of moving into hygiene – and the focus from global regulators and of course our own regulator is much more around investor outcomes, and we just have to get on board with that.”
Eve Finn, Managing Director, Legal & General Investment Management, spoke about the experience of choosing Ireland as LGIM’s European operating hub, saying: “Ultimately our responsibility as asset managers is to protect our investors and to make sure that they get the outcomes that they want and I think where we’ve had the benefit of using CP86 as a framework is to enhance what LGIM already does in other parts of the world and put an extra layer on the top of it.”
Rachel Turner, Global Head of Commercial Custody Product, BNY Mellon, commented on the fantastic growth in the industry over the last number of years, which she attributes to “the creativity and the innovation of the people who are working in the industry”. She said: “I think that’s something we should all be very proud of in terms of the adaptability of the workforce and the ambition of the workforce to find ways to ensure that we remain top of the stage when it comes to a domicile of choice for servicing your business, and I think we’re at a great opportunity to really push that forward.”
Xavier Parain, Group Chief Executive, FundRock, also acknowledged the talent of Ireland’s workforce, saying: “We decided to recruit more than 30 people in the last two years on the ground in Ireland and with all the universities that we have here in different regions it’s really easy to do this … I do not see all the discussion around delegation and governance as a risk or concern but more as an opportunity for the Irish market.”
Finally, the concluding session looked beyond regulation to consider some observations and predictions about the long-term outlook for the industry. Alex Birkin Partner, EMEIA Industry Leader and Global Wealth & Asset Management Consulting Leader, stated that the industry was approaching an inflection point pre Covid-19, driven by a number of structural shifts which have been accelerated by the pandemic.
In discussing how asset managers should respond, Alex highlighted the following priorities that CEOs should focus on over the next five years:
He concluded: “Delivering long term value has never been more critical to the stakeholders of our industry. The world will get through this crisis and economies will recover. However, we need to ensure we don’t squander this opportunity to elevate the purpose of the asset management industry, thereby delivering greater benefits to investors and society.”
If you would like to explore any of the topics or themes from EY’s Funds Forum 2020 in greater detail, don’t hesitate to reach out to us.