“For those who don’t believe this, they are undoubtedly sticking their heads in the sand because all you have to do is look at the changes in the US department of labor to see the pace of change,” said Berens, addressing an audience of offshore life office executives during a panel discussion at International Adviser’s Fund Links Forum 2016.
US fiduciary rule
Berens was referring to the US department of labor’s fiduciary rule, currently being pushed through congress, which is considered the equivalent of the retail distribution review (RDR).
The rule aims to put an end to hidden fees and conflicts of interest in the investment world, requiring brokers or advisers to pick products that are in their clients’ best interests when recommending investments for retirement accounts.
The managing director also pointed out that the increasing number of international financial services markets adopting a ban on commission, or kickbacks, is a bellwether for upcoming regulatory change.
“If America, the single biggest mutual fund market in the world can do it and the UK, and Hong Kong and other markets in Europe are doing it then it will go around the world. Within five years, I suspect the whole world will be following suit,” said Berens.
“If America, the single biggest mutual fund market in the world can do it...I suspect the whole world will be following suit.”
In January last year, Hong Kong Securities & Futures Commission (SFC) legislation called Guidance Note 15 (GN15) banned indemnity commission on investment-linked assurance products (ILAS).
Earlier this month, South Africa confirmed that the first phase of the upcoming Retail Distribution Review (RDR) will be introduced on 1 January 2017.
‘Ridiculous‘ life offices
He slammed international life offices as “ridiculous” for being “so far out of line with the rest of the fund management industry” in keeping up with regulatory changes.
“JPM is at the forefront of this [regulation] because we’ve had to be as we’ve had our own regulatory problems. We’ve had to change a lot of our KYC/AML and we’ve taught the life offices but they are ridiculous,” he explained.
“Regulators around the world are talking to each other and as they talk to each other more, this kind of stuff is becoming more important.”
Also speaking at the day-long conference, James Rainbow, head of UK financial institutions and strategic accounts at Schroders, agreed adding: “In the last two weeks, we’ve had clients through the door from Taipei, India and Thailand and they’re all asking about what RDR is and what impact will it have on their market.”