Nutmeg warns of threat of European overkill on execution only and discretionary share trading

6th June 2013

The UK is facing an imminent threat from EU regulation which could see discretionary and execution-only equity investors having to confirm in writing that they understand what they are buying before being able to do so, Nutmeg.com chief executive Nick Hungerford has warned.

Although Hungerford says he sees a growing trend for investors to take more control of their investments including side-stepping many layers of intermediation, the online discretionary fund managers says the EU move represents a significant increase in EU regulation which the UK must lobby to stop. The change is contained in new regulations designed to protect consumers as part of the Key Information Documents and the Packaged Retail Investment Products legislation.

Speaking at a round table on how equities will be bought and sold in future this week, Hungerford said: “The Key Information Documents and Packaged Retail Investment Products regulations would see everybody in this country have to write to confirm that they understand what they are buying before they buy it and confirm that they are willing to accept it. It is fine in Europe where it helps prevent cold calling which is currently legal. But in this country we have cold calling laws. Can you imagine a situation, which might be the case in a couple of months, where every single person that wants to deal in execution only or discretionary has to write with written approval as a private customer first. These things are going through European law at the moment. We have to work hard to stop them.”

More generally, Hungerford says there is a trend towards more direct and transparent purchasing of equities. He says the share of discretionary mandates of equity trading has declined in two years from 30 per cent two years ago to 21 per cent this year.

“That is real push back from the financial crisis and people not having the control and transparency they wanted over their portfolios. That is going to be a real theme. Do people have the transparency and directness to go into the markets they want. We are looking to join up people who are looking to trade directly with markets without all these intermediaries in between.”

 

24 thoughts on “Nutmeg warns of threat of European overkill on execution only and discretionary share trading”

  1. anteos says:

    Hi Shaun

    Great article as always.

    I wonder when the public will finally cotton onto the austerity myth. Although if you look at the beeb, the borrowing figures are hidden away down the page. And article no. 3 is about hpi.

    Now that QE is over, when will the bond markets take action? After the next election?

    1. Anonymous says:

      Hi Anteos and thank you

      Actually the bond markets have turned against the UK to some extent. For example the 5 year Gilt yield which had fallen to 0.5% in the summer/autumn of 2012 is more like 2% these days. But whilst there has been an upward push it has also been held back by the fact that other bond markets are still in a bull phase. For example the German 10 year Bund yield has fallen to 1.15% several times in the last fortnight. So as our yields rise they look attractive internationally.

      But once the global bond rally fades then matters will build I think.

  2. therrawbuzzin says:

    How many GDPs is that deficit pertcentage rise measured against?

    1. Anonymous says:

      Hi therrawbuzzin

      Sorry but I do not understand the question…?

  3. Forbin says:

    Hello Shaun,

    Another kan kicked I think

    so the joining workforce will need to

    1, pay off loans

    2, get an exorbitant mortgage – needing two really good wages

    3, spend their way out so the economy can recover

    4, pay for their pensions

    5, and raise the next generation of workers which aint cheap.

    and along with falling real wages and food , housing and fuel cost of living running away

    So the very best will leave and leave us with the mediocre ones to run the country

    what could go wrong ?

    Forbin

    PS next scandal after PPI , student sueing the Uni for poor education

    1. Anonymous says:

      Hi Forbin

      I am intrigued by the immigration point. It is probably as much hype as fact that London is now called the 6th largest French city and the 7th largest Italian one due to the exodus from there to here. But there is a principle behind it of immigration to the UK.

      However if people are now to leave the UK where is there to go?

      1. Noo 2 Economics says:

        The US, Australia, Canada, Germany, New Zealand, Switzerland, Sweden, Norway, Finland. I could go on, all these countries are infinitely “nicer” places to live, albeit you’d have to learn the lingo for some of them.

        I seriously considered emigrating to the US when I was in my 20’s and decided against it being scared of the unknown, I regret that decision to this day.

  4. Drf says:

    Surely the only practical solution to the escalating stufent debt is to drastically cut down the number of students, many of whom cannot get a graduate job once they have an inferior “degree”? A good start could be made by abolishing all the Mickey Mouse “degree” courses. Then we need more proper indentured Apprenticeship schemes again run by large employers to take up the slack.

    1. Forbin says:

      Drf I agree and, no, I’m not uni trained

      apprenticed yes , but not uni – did well anyways

      but the “solution ” I believe was to get everyone a uni degree because those with uni degrees got paid better

      ergo if everyone gets a degree then they’ll all be paid better …..

      umm , what could go wrong ?

      now we have the political problem of how to back out of the universal university degree – who tells the public their little jonny or jilly isn’t fit to go ?

      Forbin

      1. Drf says:

        Well, I may be treading on dangerous ground, but the Grammar School system when it was in place with universal 11+ scholarships/Grading Test/ 11+ test did the filtering automatically, and as a result there was a limited number of undergraduates.

        1. Anonymous says:

          that was a fairer more egalitarian system. Current system offers best education based on parents ability to pay private school fees.

      2. Noo 2 Economics says:

        “who tells the public their little jonny or jilly isn’t fit to go ?”

        The exam results, when the Uni’s simply say “we only take the top 10% students based on exam results/marked coursework – no need to involve politicos and at that point I’d bring back full grants on a means tested basis.

    2. Anonymous says:

      There’s simple solution. Remove the state guarantee on student loans. That would reduce silly borrowing and repayment problems. The open university gives people a chance of a degree without debt, though it is undoubtably harder and slower combining part time study with work.

    3. Noo 2 Economics says:

      This would be a good star,t but bear in mind you would be moving a problem of latent unemployment. I believe a lot of students are at Uni because there’s no jobs they can get/want. Preventing Uni access for them will swell the unemployment queue, social security expenditure and public sector borrowing requirement marvellously.

      The Government probably prefers the current system so it can fantasise that the student loans aren’t social expenditure but reclaimable loans – kind of puts me in mind of the public/private partnership fiasco’s of the last couple of decades.

  5. dannyboy says:

    Hi Shaun,
    Thanks for doing a post covering some of the concerns of the young. Whilst I guess I’m not technically “young” any more, I feel strongly that the younger you are in today’s UK, the worse the deal you are currently getting. I can’t see this changing for some time, and this will be hugely detrimental to our society in ways we don’t currently understand.
    The less talked about aspect with regards student loans is the interest rate – the more you earn, the higher the rate of interest you pay, keeping everyone in debt for longer – even the better paid. Is there another form of finance around whereby interest rate increases as lender’s risk decreases? It’s a tax, pure and simple, putting the better paid youngsters on a > 50% marginal tax rate on income for as long as possible. It’s madness, and there are better solutions that are just not politically preferable.
    Danny

    1. Anonymous says:

      Hi Danny

      I feel that this particular generation of young people as likely to get a hard deal. There of course have been past recessions and dips but they are being hit in various ways.

      1. The wages issue is bound to be most troubled at the bottom of the scale.
      2. House prices are soaring away from them

      Now many will be saddled with student loan debt as a type of tax as you say. It would have been more honest to have a type of graduate income tax wouldn’t it?

      Encouraging student numbers and then putting much higher tuition fees on them was like a one-two punch in boxing. I hope that it does not prove to be a knock-out blow.

  6. Noo 2 Economics says:

    “After all how else can one describe the increase in the maximum fee for tuition to £9000 in English and Welsh universities?” – how to hide the true unemployment rate and vainly try to reduce expenditure by calling the “new style grants” “student loans”.

    “The Government is already struggling to collect student loans effectively”. Quelle suprise!!

    Face it, a student obtaining good grades in a “useful” subject will leave the country to obtain employment abroad resulting in him/her achieving a good standard of living. Alternatively, they start a self employment and their books will always show a small income as they drive about in their Porsche’s and live in a 8 bedroom mansion.

    Then there’s the rest- they’ll keep moving jobs/addresses forgetting to inform the authorities of their change of circumstances. A few will actually try to repay the loans, become disillusioned with the future of continuous debt they face and adopt one of the 3 approaches outlined above, ergo it’s student grants by the back door only now to a much larger group of people as this way it masks the true unemployment rate.

    1. Anonymous says:

      Hi Noo2

      The whole situation does beg quite a few questions I agree. The authorities will have an even greater incentive to keep tabs on graduates who of course have an incentive to escape such a watch! As you say there is particular encouragement for graduates to simply emigrate.

      Is it more 1984 or Brave New World?

      1. Noo 2 Economics says:

        I’m going for 1984 – seen the new electoral register questionnaires?

        Consulting with family members and reading between the lines of the threats of £80.00 fines for non completion and return, it appears if you are the home owner/council tax payer you are automatically re-registered, if not, complete the form or else!….

    2. Elle says:

      ‘Face it, a student obtaining good grades in a “useful” subject will leave the country to obtain employment abroad resulting in him/her achieving a good standard of living’

      …..Yeah, right. What percentage of Brits actually speak a foreign language that is in demand well? And if you think we will find a top-end job in English-speaking countries like Australia and New Zealand, you are delusional haha. You need to be in an ‘essential’ industry to move to the US (such as nursing) or you need about $100,000 to invest in a business that employs Americans predominantly, if you don’t have *immediate* family members there (e.g. Mum or Dad).

  7. Anonymous says:

    Great column, Shaun. Student debt is an acute problem in Canada, too. Gary Mason wrote an op-ed about it on September 6 in the Globe and Mail, “University students: Another day smarter, but deeper in debt”.

  8. Grumpy Old Paul says:

    See http://www.ukpublicspending.co.uk/ which is not a government website but does give the sources of its data.

    Now for a few inconvenient facts:

    1. The biggest single item of government expenditure is State Pensions for which the cost is growing due to demographics and the triple lock.

    2. The next biggest item is Health Care which has been ring-fenced.

    3. Interest on national debt is growing year on year

  9. Drf says:

    I think you will find that the number given for supposed “state pensions” is deliberately deceiving, like all other government statistics now; it includes all the pensions paid by the state, including those gold plated ones to ex-Cabinet Minsters, MPs and senior civll servants, which are very large. Guess which constitute the largest portion of that total amount? King’s pension alone is an enormous amount as a reward for practically destroying the UK economy !

  10. forbin says:

    and Mr Bean’s was 4.25 million , gold plated of course

    Forbin

Leave a Reply

Your email address will not be published. Required fields are marked *