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Dáil Éireann debate -
Wednesday, 28 May 2003

Vol. 567 No. 6

Ceisteanna – Questions. - Departmental Bodies.

Enda Kenny

Question:

4 Mr. Kenny asked the Taoiseach if he will report on the recent activities of the task force on asset management; and if he will make a statement on the matter. [11468/03]

The asset management task force was established in late 2001 to examine the recommendations of a report produced by the IFSC funds working group on opportunities for a broader-based institutional asset management business in Ireland. The task force and working group operate under the aegis of my Department.

The report of the asset management task force was published in May 2002. In it, the task force makes a number of recommendations in the areas of education, regulation and marketing. The recommendations are designed to increase the opportunities for the asset management business in Ireland. Since publication of the report, the task force has continued to exist to progress the recommendations.

What impact is being given to the implementation of the recommendations that might be accepted? What is being done to strengthen undergraduate, postgraduate training in asset management, particularly in relation to the chartered financial analyst, CFA, programme which was specifically highlighted in the task force report?

Deputy Kenny is correct. Asset management is big business and it provides enormous opportunities throughout the world. Business, globally, is now in excess of $35 trillion with more than 5,000 people directly involved in financial services involved in the asset management business. We are now faced with the huge task of holding and continuing to grow this business. Some €240 billion of current Financial Services Centre business is under asset management.

The Society of Investment Analysts in Ireland wanted to engage with the educational institutions to assist in ensuring their programmes take account of up-to-date practice in the asset management industry and to ensure they have, every year, graduates coming on board who can work in this area. The certified financial management degree, the postgraduate degree referred to by Deputy Kenny, has been developed between the industry and the Society of Investment Analysts in Ireland and they have agreed a curriculum. They have also agreed a research programme with a number of universities and third level institutions to investigate, after two years, the impact of the increased number of students who studied for the certified financial analysis qualification. The report was undertaken to ensure that not alone did they obtain graduates but that they obtained ones qualified in international bodies. The courses have been established and are operational. We hope this will enable us to maintain the enormous business we have.

This is a competitive area and if we do not stay ahead, other financial centres will take over. Competition between the financial centres for this business is ongoing. We have €240 billion under asset management. That is a great deal of money but the market in this area was $33 trillion five years ago. It is an enormously lucrative area but one cannot get the business unless one has people qualified in this area.

Do I understand from what the Taoiseach said that the purpose of the task force was to ensure the provision of young people with the skills to work in this industry? Was the regulatory aspect of the role of the task force to ensure best practice operates in the industry? Has the graph continued to rise since the slowing down of the economy?

Indications in recent years are that competition in this area and our overall management of assets is increasing. I do not think it has risen much in this area but it has managed to maintain its position. The task force dealt with the regulatory issue which feeds into IFSRA There must be tight regulation in this area. The Central Bank is on top of the issue. One needs staff and the task force has, in its report, developed numerous marketing initiatives which were discussed this week by the Central Clearing House. The Central Clearing House is chaired by the Secretary to Government. Other clearing houses deal with issues such as insurance and so on.

Asset management is big business – I said earlier it was approximately $33 trillion at 1999 levels – and is good for employment. Other financial centres are far more aggressive than us in their marketing of it. I have stated that the Government should participate and work with the industry to try to cut a slice of the market. I do not think the Government should pay for the marketing – it is a lucrative business – but it should get involved. My Luxembourg colleague takes a very aggressive approach to marketing it and to the way they use the state in it. We should help, but I do not think we should pay for it.

It is a very good employer. Of the 11,000 people in the IFSC, 5,000 are directly involved in this.

Are specific courses being designed?

Yes, special degree courses have been developed for graduate and postgraduate studies and a number of universities have taken up the courses.

As somebody who has worked in a business school in the Dublin Institute of Technology, the Taoiseach's alma mater, I know this is an important outlet for graduate employment. Is the Taoiseach aware that the qualification level which is being expected in this area is a masters degree? I do not want to reopen the debate that his colleague had over the fees; he knows my views on it. For many people of modest means, accessing and funding a masters programme in one of the top business schools in Dublin is fairly expensive. One is talking about substantial fees which are in the order of those given in The Irish Times.We are losing quite a number of good graduates. At present, quite a number of them are going abroad because they are getting offers of taught masters in places like the London School of Economics at very competitive rates compared to the rates here, and they are then often lost to our industry.

Therefore, it is an adjunct to the whole debate. If the Taoiseach wants highly qualified people in this country, does he agree that there should be more consideration given to how he might assist people who need to do masters and post-qualification programmes, either in accounting or finance, to qualify for these jobs and to be employed at senior levels ultimately?

On the fee levels which have been put out for this, it costs €2,500 to sit the CFA exams – between tuition, books and fees. That is what the industry tells me. Some 165 people sat the various levels of the examination this year. Therefore, we are picking up the numbers.

I have no argument with what Deputy Burton stated about the levels but if one has been a good asset manager, one is qualified to a great extent as regards the basic degrees. They then go on to see the figures.

I was reading these questions last night. The Deputy is right in saying that we are losing people, but they are taking €250,000 plus fringe benefits at 26 or 27 years of age. It is a competitive business. The overall package is €350,000. It is enormous money for our sectors of the industry. It is a question of the more we can qualify and the more the banks can put in. They are obviously not paying those kinds of salaries unless there is a good profit margin in it. What I have been doing is trying to press the colleges here to get our bright young people into these areas. The banks should be paying their fees.

I agree.

They should be paying their fees and then getting some deal that they stay so many years. I look in awe at people of 27 and 28 if they can walk out and get packages of €250,000 or €350,000. The only way we can deal with it is by getting more of them through the system. We should do anything we can to get more of them through the system because obviously they are highly thought of. Apparently Irish graduates are more sought after than many other nationalities, which is good. Nobody in this game is on less than €150,000, from what I can see.

The Taoiseach's last comment is particularly apt, given the question I want to put to him, because he used the words "this game". There is a sense that there is a game being played in this area. Is part of the remit of the task force to address what I would call required checks and balances regarding the activities of asset management, given that invariably and often – not only in the Irish experience but also internationally – in some cases much of the reported successes are based on notional values rather than on real asset improvement? We have seen all of the difficulties associated with dealers in international situations which have had effects on asset management here at home. Could the Taoiseach give us some assurances that checks and balances are being prescribed as a result of the work of the task force?

Yes. Obviously not everybody in the business is doing tremendously well. It is only those at the top who can get the high salaries. Many others come in at normal salaries, which are fairly high in financial institutions anyway. Depending on how the international economy is faring, many of the people would not be getting those salaries. It is the people at the top end, who are obviously crucial to a business, who can command high salaries.

To assure the Deputy on the regulatory side of it, the task force has continued to meet to consider the recommendations contained in the report. The task force has representatives from my own Department, other Departments and agencies to facilitate a potential increase in the number of students for the CFA programme. That is how we can make sure that we have enough people in the business here and can grow the business here, and also keep the salaries at realistic levels and not lose them to financial services outside Ireland. They are also co-ordinating their discussions between the influential international body, the Association for Investment Management and Research and Irish universities. The report also deals with marketing which is a key objective for them.

I assure Deputy Ó Caoláin that the regulatory aspect of this is very tight. The Central Bank, in all of this, will provide an effective focus on matters of concern to consumers and retailers. It will have a dedicated consumer director. A new structure will facilitate continued effective co-operation between the regulators and those charged with monetary management. There is also international co-operation. The IFSRA is the new board which is the overall regulatory body. It was launched on 1 May and is dealing with the issues to which Deputy Ó Caoláin referred – the regulatory and control issues.

The report was trying to regulate its own industry to have sufficient people, who then would have normal salaries, in order that we would not be losing people to such an extent because it is only people at the very high levels who will be coaxed away by high salaries. However, it is a well-regulated area. There is enormous money involved – they now deal with trillions, not millions or billions.

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