Financial advice firms are worried about access to retail clients in the EU when the UK becomes a third country after Brexit, according to the chief executive of industry body Personal Investment Management and Financial Advice Association (Pimfa).
Pimfa chief executive John Barrass expressed his views to International Adviser following the launch of the UK Treasury’s select committee inquiry into the future of Britain’s financial services after Brexit.
This committee will examine what the Government’s financial services priorities should be when it negotiates Britain’s future trading relationship with the EU and other countries.
It will also look at how the UK’s financial services sector can take advantage of the UK’s post-Brexit “trading environment” with the rest of the world, and whether the UK should maintain the current regulatory barriers that apply to third countries.
Barrass said: “We will be making representations to this committee and we will be doing so from the point of view of our member firms. The firms are worried about making sure that they can access retail clients in the EU after we become a third country.
“The key thing for us on this is that it doesn’t matter to the firms whether there is a deal or no deal because the effect is exactly the same in respect of the timing. We don’t have in the retail sector the equivalent provisions within the relevant laws on how you access retail clients for investment purposes.
“We will be telling the committee that the transition period is much preferable as it gives more time for firms. We also will ask what they are aiming for – the duration and mitigation with clients in the EU. The critical point for us is we want time.”
Premier financial centre
Nicky Morgan MP, chair of the Treasury Select Committee, said: “London is the world’s premier financial centre, and many of us want to keep it that way.
“Brexit will have a significant and long-lasting impact on the financial services sector, including the insurance, retail banking and asset management sectors, in the UK, the EU, and potentially the rest of the world.
“The UK may converge, seek equivalence, or diverge from the EU. As part of our new inquiry, the Treasury Committee will examine the risks and rewards of each of these choices.
“We’ll also explore the opportunities outside Brexit, such as fintech, on which we should be capitalising.”
Questions
The Treasury committee will accept written submissions from members of the public and there is no set deadline for the submission of evidence to the inquiry.
Questions that the committee are looking to ask are:
• What should the government’s financial services priorities be when it negotiates its future trading relationship with the EU?
• What should the government’s financial services priorities be when it negotiates with third countries in the rest of the world in order to allow UK financial services access to their markets?
• What regulatory actions are required for each specific segment of the UK financial services industry in order to maximise access to EU markets?
• How can the UK financial services sector take advantage of the UK’s new trading environment with the rest of the world?
• Should the UK open its financial services markets to external competition from countries outside of Europe, or should the UK maintain the current regulatory barriers that apply to third countries?
• What skills and immigration policy will the UK financial services sector need once the UK has left the EU?
Miles Celic, chief executive of the industry-led body representing financial services TheCityUK, said: “This inquiry will cover important questions that have a critical impact on the long-term competitiveness of the industry.
“The UK is the world’s most international financial centre and a major contributor to the UK economy – it is vital that careful consideration is given to how we can retain this position and expand our trade links after Brexit.
“There is no appetite in the industry to take a bulldozer to our current regulatory framework, not least because much of EU regulation was written with the UK holding the pen. The UK’s reputation for quality regulation and high standards is a key competitive advantage. Firms continue to come to London, in part, because of the mark of quality this brings.
“When the UK leaves the EU, its regulatory framework will need to be updated to take on new areas which are currently dealt with at the EU level. A key part of this will be expanding public and political oversight of our regulators as well as making sure they have the additional resources they need to ensure the system remains proportionate, coherent and fit for purpose.”
Passporting
Morgan also said that the UK should be able to strike financial services “passporting” deals beyond Europe.
“Passporting applies with the EU and that will end with Brexit,” Morgan said. “But why couldn’t passporting apply to other countries around the world that share our high regulatory standards?”
Passporting is a key device in the current UK-EU relationship, allowing finance companies to sell their services from one-member state right across the bloc.
The City of London has become the main hub for sales, but it is braced for the end of passporting when the UK leaves the EU, and long term market access arrangements between the two sides are due to be thrashed out as part of a future relationship agreement.
Annabel Brodie-Smith, communications director of the Association of Investment Companies (AIC) said: “We believe Brexit should allow UK policymakers to deliver better targeted and more proportionate regulation.
“Ultimately this will mean lower costs and greater competition for the funds sector and deliver long-term consumer benefits.
“At the moment UK funds are subject to EU obligations whether or not they are marketing into other member states.
“This is particularly unfortunate for the closed-ended investment company sector which is 95% held by UK shareholders but is subject to rules designed to govern cross-border marketing within the EU.”
