Dan Godfrey: fund management must change, or people will “march down the street with pitchforks”

Published on Mar 17, 2016

Merryn Somerset Webb talks to Daniel Godfrey, ex-chief of fund managers’ trade body the Investment Association, about management fees, executive pay, and how to improve the industry from the consumer’s point of view.

Dan Godfrey: fund management must change, or people will “march down the street with pitchforks”

0:03hi I’m Merryn Somerset Webb editor-in-chief of money week magazine
0:08welcome to another moneyweek video I have with me today Daniel Godfrey Lee X
0:12chief executive of the investments Association we’re going to talk about
0:15huge variety of things across the fund management industry how funds to work
0:20hard charging should work what would make the industry better or better from
0:23the point of the consumer anyway but first we’ll just talk briefly about why
0:27when I introduced Daniel I introduced him as the ex chief executive of the
0:31investment Association what what happened there
0:33well good morning mary well simply what happened at the investment Association
0:39was that a small number of quite large members took the view that they weren’t
0:45happy with the direction of travel of the Association I made it clear that
0:48they intended to leave and in a trade association real strength comes from the
0:54unity of the membership and so clearly even if it’s a small percentage by
0:59number and even a relatively small percentage by total value of the assets
1:03managed it gives you a real and immediate problem because you need to be
1:06able to speak with a single unified voice and i felt considered it was put
1:12in the interests of the Association for me to leave and so about two months ago
1:17I did several of those people left anyway right well I don’t know what the
1:21outcome ultimately will be clearly the world were a couple who had indicated
1:27that they intended when I saw you at St James places said they would be
1:31schroeder’s exhibitors so your health and your soul is made no difference was
1:35well I don’t think there was much of a choice to tell you the truth
1:40clearly there was a very public discussion going on at the time mobutu
1:45concerned about other members might follow the ones you indicated that they
1:50intended not to renew as far as I’m aware though the only one that’s
1:53publicly made any comment is James’s Place and so I think you’ll just have to
1:58wait and see what the outcome is you know whatever is reported i’ve seen
2:02nobody actually making any public comment from any of these companies
2:06expressing any dissatisfaction with me or the direction of travel of the
2:10investment Association which was executing structure in that direction of
2:16you were trying to do something very specific association yes the mall the
2:20strategy of the investment Association was to try to make investment that sir
2:24we believe that when you say better what do you mean better is rated better me
2:30more profitable well I think that there’s no tension between the two
2:36actually it starts with better for the consumer so if you can make better
2:39investment better for the clients we believe that makes it better for the
2:43companies in which we invest but if the economy and better for the long-term
2:47sustainable commercial success of our members that necessarily follow any of
2:51them members of the investment Association Inc stunningly commercially
2:54successful for many many many years now they don’t pay much attention to the
2:58needs of the consumer at all I like to think that I agree with you I’m not sure
3:02that it necessarily follows it treating your consumers well lead to a more
3:06proper business that’s a better business depending on how you define them but not
3:10a more profitable business for the members of the investment Association
3:13that doesn’t matter what I can see why you might say that but of course I think
3:16you’ll also be the first to say that the past is not necessarily a guide to the
3:20future and we’ve been seeing both disruptions retain more G disruptions
3:24Renu entrance we see prices coming down she usually in passive funds and I think
3:29we’re also going to see a regulatory focus on the investment management site
3:32that the banks have been having for the last few years and so what has been true
3:36in the past may not be true the future I think there’s also a fundamental
3:41philosophical point here which is that when a client pays investment managers
3:46who manage their money on their behalf let him speak their agent and if you
3:50think about what an agent is what it means to be
3:52regions I think it’s pretty clear that you pay someone to be you just a better
3:56version someone who knows more than you do about something so much greater
4:00expertise may be greater networking greater connections greater facilities
4:04and technology maybe someone who can you scale but effectively to do a job that
4:08you would otherwise have to do so and if you pay someone to do that to act as you
4:12know I think that agent has a responsibility to behave as I they are
4:16you and what your interests first so I don’t think there’s really any the
4:22average investor cares about how companies run cares about maybe social
4:30or environmental policy cares about how much TV executives are paid except maybe
4:35they don’t all they care about is how much money they get out of the end
4:38there’s another connection here that I think I agree with you but which for the
4:44man on the street the investor on the street might look at the schedule I
4:46didn’t feel like I might have given these people my money to invest really
4:51given them is my hope that my dreams for the future and those hopes and dreams
4:55are connected entirely 100% to money that man can make me and how much the
5:00chief executive the company’s impotent and daily by the by how much money can
5:03he general for me so maybe it’s too complicated
5:07no I don’t think so maybe I have actually because I wasn’t the point I
5:10was trying so no I think it’s very good
5:17so really what the point I was trying to make now is that you
5:21investors are paying me to do the best possible job for you and get you the
5:25most money and that involves during your money carefully through the capital
5:28markets not allowing the broker’s other intermediaries in those markets to
5:35extract more rent than is absolutely necessary we are your agent we should be
5:38your champion in those markets we should get the best possible return them to
5:43come back to your point there’s a question I think about time scales time
5:47horizons so yes it may be that if we are only focusing on how much money I
5:53companies making over the next three months 12 months maybe even two or three
5:57years that the environmental footprint of the company the way they treat their
6:02employees the reputation maybe they have in their local communities on the pay of
6:06the chief executive is not readily funds but if we’re looking at investing in
6:10companies rather than just trading installs if we’re looking at it against
6:14the time arises that I think you know your readers hob which will typically be
6:18and twenty years I mean even someone like me in my mid

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