Posted on 4/12/2018 by Eliza Mould
Author: Tom Baker | Manager - Finance & Operations
Asset management has, and always will be, a global industry. That means that, as with many other sectors, Brexit could have a major impact. The truth is that, right now, nobody can be certain what will happen in asset management post-Brexit. However, while the status of Brexit is still very much up in the air, it is important to question what could happen, and ensure that the industry is ready and prepared.
Although there are many different aspects that are currently being discussed in the world of asset management, there are typically 3 primary concerns for the industry as we edge closer to Brexit.
1. UK Management of European Funds
There is potential for UK-based asset managers to be ‘shut out’ of management of European funds. How big an impact this will have will largely depend upon the size of the business, or, more specifically, whether the business has a global presence. Those that do not will be affected to a greater extent, with a need to look into potentially outsourcing the management of these funds to EU firms. It has been reported that many asset managers already have contingency plans in place to move functions under a hard Brexit, with Dublin and Luxembourg emerging as ‘hotspots’, taking on extra hires to look after European funds.
2. Regulatory Equivalence
Regulatory equivalence agreements are already in place between the EU and a number of third countries. In fact, Switzerland and Bermuda have achieved full equivalence status. There is little doubt that the UK will be granted regulatory equivalence post-Brexit; with the same financial regulations in place as the EU, UK regulations will undoubtedly meet the criteria for equivalence. The concern here is that equivalence can take several years to achieve, potentially leaving the UK in a ‘regulatory limbo’, and resulting in an overall lack of confidence in the asset management regime in the United Kingdom.
The ‘skills gap’ is present within many industries. However, it is perhaps most notable within financial services, with PwC suggesting that 70% of financial services CEOs believe that the limited availability of talent will be detrimental to their growth. Post-Brexit, will UK asset managers be able to recruit and retain the best talent? Global forecasting leader Oxford Economics estimates that between 30 and 40 percent of asset managers in London are not UK citizens. What will happen to them after Brexit, and will London be able to maintain its status as a global centre of excellence in asset management following withdrawal from the EU?
Of course, under a ‘soft’ Brexit — or indeed no Brexit at all if it comes down to a further referendum — it is unlikely that much will change. However, although we don’t know what will ultimately happen, it appears that the majority of asset managers are preparing for a ‘hard’ Brexit, rejigging their operations and moving key players from the UK to other EU countries, to avoid being ‘cut off’ from European funds.
If the Post-Brexit uncertainty in Asset Management is something you can't quite get your head around - or something you'd like to explore further from a recruitment angle - please don't hesitate to get in touch with me; firstname.lastname@example.org or give me a call on 0203 189 4311. Alternatively, have a look at the jobs I'm currently recruiting for.