Whatever their investment views on the likely impact of Brexit on the UK economy, the impending threat of an EU divorce on harsh terms will impact asset and wealth managers’ costs and product offering.
Financial services consultant The Wisdom Council warns that, under the consequences of a hard Brexit, it is likely that UK funds will have to re-register under a new structure in order to remain compliant.
It assumes that UK funds sold to retail investors abroad would lose their Ucits status – and so become alternative investment funds (AIFMs) – and estimates a total cost of £2m (€2.3m, $2.5m) per fund range.
These costs will include the likes of legal advice; tax consulting; literature translations across various regions; reprints; the cost of authorisation; and additional administration costs, all of which are perfectly admissible to be charged to the TER of a fund.
"Hard Brexit could cost firms £2m per fund range"
“These costs might be okay for some of the very large fund groups – and we don’t know yet if they are going to bear the costs – but there may well be some smaller groups that will have to pass on the costs, which will likely be the same whatever the size of your firm,” says CEO Anna Lane.
“Regardless of the costs, there are going to have to be a slew of communications reasonably soon, and is anybody sure that the end client is going to understand this?
“For example, Sicavs don’t have the same voting rights, and once you go out of Ucits the end investor is not engaged in the same way.
“Asset managers are potentially having to get around this by using AIFM structures which are typically used for hedge funds. What is the impact on the compliance process of somebody who is advising on these funds?
“And is there going to be an impact on a wealth manager’s managed portfolio service when you have different types of individual risk rated funds in there?”