Leading financial experts issued a series of stark warnings on the public deficit, savings and pensions, financial education, regulation and macro stability at the Broadgate Mainland and Scottish Investment Operations (SIO) breakfast briefing held in Edinburgh on 29 April 2010.
The panel were:
o Richard Romer-Lee, Investment Director, OBSR, a Morningstar company (Chair)
o Alan Thornburrow, CEO, Scottish Investment Operations
o Colin McLean, Managing Director, SVM Asset Management
o Harry Morgan, Head of Investment Management, Adam & Co
o Professor Andrew Clare of Cass Business School and Chairman of Fathom Consulting
"An intervention from the IMF and a downgrading in the UK’s credit rating were possible scenarios for the UK economy and these would bring more decisive action in reducing the public deficit than any forthcoming election outcome."
These comments were made by Colin McLean, Managing Director, SVM Asset Management at the seminar, which discussed threats to the UK’s status as a global leader in financial services.
Richard Romer-Lee, Investment Director at OBSR, a Morningstar subsidiary, who chaired the seminar, urged the US and Europe to work together on tacking global regulatory issues. "Co-ordinating global regulation under the aegis of the G20 had proved ineffectual. It needs the US and Europe – homes to the world’s leading financial centres – to work together and agree on a realistic strategy."
At the seminar, other topical issues under discussion included the future of pensions and the demographic timebomb. Professor Andrew Clare of Cass Business School and Chairman of Fathom Consulting called for greater realism over pension expectations and on the industry to provide innovative solutions.
"The current assumption that you can work for forty years and retire for thirty on a two-thirds pension is completely unsustainable," said Professor Clare.
"Changing demographics are a potential disaster but also a big opportunity as there will be a need to develop more dynamic and innovative products that match the health and savings realities of people who are living and working longer."
Harry Morgan, Head of Investment Management at Adam & Co, highlighted the issue of hostility towards financial services as a major concern. Whilst being optimistic on the long term outlook, given the resilience of the industry and its capacity to adapt, he observed that the various party Manifestos all pointed towards a period of immense change following the Election. He predicts that the UK, in order to tackle the public deficit may need to adopt draconian measures similar to those used by the Irish government, which involved rapid and harsh universal cuts to public sector expenditure.
Although most agreed that there would be Government austerity measures on the way, there was optimism about the health of the asset management industry through recent inflows and re-start of recruitment drives which has begun again, particularly for global funds specialising in US, Far East and emerging markets.
"Upskilling the workforce to cope with more complex products and to maintain the UK’s position are vital" said Alan Thornburrow, CEO, SIO. "We need better interaction between university and industry, set new qualifications and standards and export these as benchmarks to the rest of the world," said Mr Thornburrow.
Professor Clare reiterated these observations by saying that the UK was the leader in financial education and although there was a threat from the Far East, he saw no immediate change to the financial services world order.
"The UK’s combination of its timezone, infrastructure, language and skillset would mean that any feared mass shift overseas would not materialise to threaten the predominance of London being on a par with New York as the world’s leading financial centres," said Clare.
In answering a question to the threat posed by sovereign wealth funds to the UK’s position Harry Morgan said that London was the global centre for Islamic finance and the private banking and wealth management industry, and was still a first port of call for international investors.
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