Transparency — the time for talking is over

Posted by Robin Powell on February 29, 2016

So, according to the FT, UK fund managers have “begun talks” with the Financial Conduct Authority over better disclosure of fees and charges.

Jonathan Lipkin, policy director at the main industry body, the Investment Association, is quoted as saying: “We can see a way to build an underlying system, a common template, that will provide data tailored in a way that is suitable to both retail and institutional investors.”

This may sound like good news for consumers but, having followed this story for three years now, I know it’s nothing to get excited about.

How much you pay to invest has a huge impact on the net returns you’ll receive when you come to retire. Indeed, after costs, the data shows that very few managers actually deliver any value at all. No wonder the industry likes to make it as hard as possible to work out exactly what you’re paying.

When Daniel Godfrey, the IA’s former CEO, tried to persuade members of the need for greater transparency, he was ousted. Even now, just 25 out of more than 200 fund houses have signed up to a Statement of Principles, introduced by Mr Godfrey, that included a commitment to put the interests of clients ahead of their own.

The IA and the FCA have been talking about transparency for years. But consumers don’t need talk, they need action. They need the fund lobby to stop trying to dilute the terms of MiFID, the EU reforms designed to protect consumers. They need the review of the asset management industry currently being undertaken by the FCA not to be another whitewash but instead lead to genuine change. Specifically, they need a single price — a pounds-and-pence figure — that covers all of the costs they incur, including the cost of research and transactions.

The big fund management companies know the game is up. They’re aware of what’s happened in the United States, where financial journalists have seen through the marketing spin and where politicians across the party divide are trying to tackle the conflict of interests between consumers on the one hand and product providers and brokers on the other.

US investors, when confronted with the evidence that active fund management is largely a waste of money, are turning in their droves to low-cost, passively managed investments instead. UK fund houses know it’s only a matter of time before the same thing happens here.

But the longer they can hold back the tide of transparency, the longer they can continue to prey on investors’ ignorance and plunder their returns.

To quote Henry Tapper, aka the Pension Plowman:

“Rather than messing around at the fringes of the problem, Government should make their way to Holborn asap and have a strong word with Jonathan Lipkin.“If the IA can see a way to build a system to disclose fees, then they should build a system to disclose fees. Almost everyone outside the IA believes that system could and should be built and no-one wants any further consultation.”

Please. You know what you have to do. Stop talking about it. Just get on with it.

Robin Powell

Robin is a journalist and campaigner for positive change in global investing. He runs Regis Media, a niche provider of content marketing for financial advice firms with an evidence-based investment philosophy. He also works as a consultant to other disruptive firms in the investing sector.


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