Click here for our coverage of the latest Morningstar Investment Conference UK in our special report: What the Experts Say, on subjects ranging from Brexit and risk management to the cost of funds and the future of advice.
Emma Wall: Hello, and welcome to Morningstar. I'm Emma Wall and I'm joined today by Guy Sears, Interim Chief Executive for The Investment Association.
Hello, Guy.
Guy Sears: Hi.
Wall: So, what will it mean for U.K. investors in U.K.-domiciled funds in the event that we do Brexit?
Sears: So, we have to be clear what we mean by Brexit. So, at the moment of the referendum when the decision comes in, there are none of my firms, the asset management firms, who are going to suddenly stop business or anything like that. So, people's funds are going to be absolutely fine in terms of the continued operation, the information they get, all these things. It's going to take quite a few years to work out the implications of a referendum result if the result is to leave the European Union.
The way in which European law works is it suggests there's two years for the exit. It may take longer, who knows. And across that period of time I think firms will take a lot of time to communicate with their clients, explain any impacts that there could be after those two years and beyond everything, I'm sure people are going to work to ensure that no one is unable to access their investments, no one is unable to have clarity as to where they can save and not during that time.
Wall: Having said that the British investor, in fact, investors everywhere, human nature is, people panic in these circumstances. Say, there's mass redemptions, whether or not it's founded, is that a risk?
Sears: I don't think it is a risk actually. I think there will be a real possibility that there will be bounciness on the markets for a few days. Currency will move. We've had other shocks. And the importance of this time is, people who have their advisors, they contact them and they listen to what's going on. Most people are investing for the long term.
And investing in the long term means not selling at those crisis moments and seeing it through and I think it is a matter obviously for people to take advice, but certainly none of us, myself included, I'm invested as well in funds that my firms produce, and none of us will want to take very short-term views over stuff that hopefully even someone as old as me is hoping it is on a 10-year basis.
Wall: Could we see fund houses shutting out a shop in London moving to Europe or having to set up sort of duplicate businesses that represent their European clients and their U.K. clients because we won't be part of the EU?
Sears: Yeah. So, I think it's entirely possible that some of that will happen, of course. At the moment, the U.K. has been very successful in terms of management of money, asset management. We run 37% of Europe's funds and assets from the U.K., from London and Edenborough. And therefore, if there are things that have to now be done in the EU and not in the U.K. that will require some changes. But very often these changes are structural or legal changes.
There is a need maybe to create a fund in Luxemburg and to mirror one in the U.K. It won't necessarily be seen as being a significant change to investors and if there's change, again, as I say, two years at least in the transition and we do have very good regulator. The FCA is not going to allow any of my firms to be unconcerned for their clients. The obligation to treat customers fairly is not one that just is because we're in Europe. That is one that is British and that will continue to be something that I'm sure the FCA will remind itself.
Wall: Guy, thank you very much.
Sears: My pleasure.
Wall: This is Emma Wall for Morningstar. Thank you for watching.
