Resolving the dormant & unclaimed assets challenges requires innovation, better information and an independent view. We will address . . .
THE CONTEXT & ISSUES
Returning assets to owners reduces AUM and, thus, firm scale and fees. In some instances, it will also impact remuneration. Despite growing regulatory pressure to act on unclaimed balances, many asset managers presently do not believe they face a compelling reason to resolve their unclaimed assets balances. The investigation by the Dormant Assets Commission may significantly alter that view.
But changing regimes may not be simple legally. Any approach will need to be consistent with trust law, with financial regulations and with obligations to and agreements with clients – something of a legal maze.
The scale of the issues
To resolve the problems, the sector needs to understand its scale. Even within the asset management sector, estimates of the scale of the unclaimed assets problem vary materially. Using a broad sample from some of the sector’s major firms, we aim to establish the scale of unclaimed assets in the sector.
Solutions to the challenges
What can the sector do – and not do – about the problem? Using our tracing partner, Assets Recovered, we will establish what proportion of participants’ assets are ‘gone-away’ or unclaimed and how much can be ‘repatriated’ using sophisticated tracing approaches. We will also examine the practical and legal impediments to possible solutions to tracing, asset repatriation and subsequent disposal – including to charity – of residual balances.
Is there an end-to-end solution
Quite properly, asset managers will seek a single-source solution to their unclaimed assets problem. We will review the ‘moving parts’ of a solution and examine whether it will be feasible to establish a single-source or unified solution that will realise asset managers’ preferences. We will examine how an end-to-end solution (if it is possible) might be achieved and examine legal and operational impediments that would need to be resolved for a unified approach to be operable.
Can government help?
The Dormant Assets Commission may impose a legislative solution across the industry. While that would have the benefit of uniformity and force of law, it would represent both a failure by the sector to set its house in order and a lost opportunity – to find an industry solution that works for the sector and benefits the people for whom the sector works.
If the Dormant Assets Commission were to impose a solution, what could and should it look like?
Doing good; doing well
Ultimately, either vision – that put forward by the FCA in 2014 and the Dormant Assets model from the banking sector – sees residual dormant (or unclaimed) assets going to charity. Is there an novel approach to charity that will manage better risks to the sector and better reflect the needs and interests of its original owners? We will examine the issues and will seek to propose solutions that will work well given the origin of the funds and the charitable expectations of the players.