Post-Roundtable Debate Press Release
INVESTMENT AND PENSION FUND LEADERS AGREE THERE IS NEED FOR VOLUNTARY CODE ON CLEARER DISCLOSURE OF FUND FEES AND MANAGEMENT COSTS
- True and Fair Roundtable sees investment leaders debate need for urgent action on new ‘transparency code’ and a consumer champion to encourage saving and pension investment
- Industry heavy weights warn that a lack of transparency is undermining consumer confidence and trust in the industry
- Roundtable comes as research reveals 78% of IFAs believe fund managers should be required to disclose their fees and costs in full, with 63% of consumers agreeing
- Overwhelming agreement that fund managers should at least match US standards of full quarterly fund holdings disclosure
London, 15 March 2012: Investment industry heavy-weights have today agreed in principle that there needs to be an industry ‘Code of Conduct’ to increase consumer trust by improving transparency and encouraging clearer disclosure of fund fees.
That was the finding of a roundtable discussion involving investment industry leaders which met today to discuss how to boost consumer confidence in investment funds, improve greater transparency on fees and fund management costs.
The event was hosted by the True and Fair Campaign (www.trueandfaircampaign.com), and attended by The Investment Management Association, Harriett Baldwin MP, NAPF, Which?, JP Morgan Asset Management, Lipper, Simmons & Simmons, 7IM and Kohn Cougar and chaired by BBC News correspondent Simon McCoy.
Harriett Baldwin, MP, stated, “In the past, defined benefit schemes have been able to negotiate low fees with large pools of investments. Now and in the future, it is down to individuals to make the investment choices and so transparency of fees is important in allowing consumers to make informed decisions.”
Richard Saunders, Chief Executive, Investment Management Association said, “Transparency is important for this industry. I congratulate the campaign for getting this debate going. There have been big strides in recent years, but there’s opportunity for further progress to be made. The industry has a good story to tell and my personal view is that more could be done to tell it.
“But it is important to remember that net performance is the most reliable measure of the returns investors receive from a fund, after all costs and charges are taken into account. Analysis of net performance shows that trading costs have no overall material impact on investors’ net returns. It is a myth that undisclosed charges are costing investors billions a year.”
Peter Sleep, Senior Portfolio Manager, 7IM, said, “I am constantly surprised by how often I am led astray by promotional material. Perhaps the industry is not as squeaky clean as it should be.”
The lively debate saw all parties agree that greater transparency should be a foundation for all investment and pension products and that the industry should work together to improve consumer trust in the financial services industry. One suggestion was for a consumer champion to support the interests of individual savers – though there was no consensus on which organisation this should be.
Charles Scanlan, Former Head of Pensions at the law firm Simmons & Simmons said, “There is general distrust in the pensions industry – we need comparability of investment costs across the board. I believe there also needs to be collective champions for the individual saver.”
The panellists called for industry consensus on this and a voluntary code to ensure a consistent approach.
Gina Miller, founder SCM Private said, “It’s clear from recent conversations that many fund managers are scared to reveal the full costs and frightened of how this would affect their profit margins. But the same margin pressure is inevitable if they do nothing as investors will increasingly decide on the DIY option. Many fund managers fail to recognise that it is in their medium to long term interest to behave ethically and honestly, thereby encouraging consumers to save more.”
“We need to give consumers total transparency on fund fees and management costs to build consumer confidence and increase levels of saving and in turn transform the UK into leaders rather than the laggards when it comes to investment and saving cost transparency.”
Roddy Kohn, principal of Kohn Cougar said, “Clearly in the context of giving consumers more confidence we are failing collectively. So the reason I think this campaign is important is because it sends a very clear message that we are not resting on our laurels. I can’t help but feel regulation has unfortunately failed consumers.”
Ed Moisson, Head of Research, Lipper stated, “I continue to be supportive of the True and Fair campaign’s efforts both to raise awareness of the costs of financial products and to make costs related to the activity of the manager more transparent and comparable for retail investors.
“This does not mean that a single cost figure will be necessarily more useful for investors than the current required disclosures (exemplified in the new Key Investor Information Document), but it is a debate that needs to be taken forward and the True and Fair campaign gives an opportunity for the industry to do so.”
Recent research commissioned by True and Fair reveals that 89% of consumers would like fund managers to disclose a full breakdown of investment fees and almost two thirds (63%) say that they would be more likely to invest if there was clearer labelling of products and transparency on costs and fees.
Additional research conducted this month also reveals that 78% of independent financial advisers (IFAs) believe that fund managers should be required to disclose the full breakdown of all fees incurred when investing a client’s money.
SCM Private initiated the True and Fair Campaign in January 2012 calling for 100% transparency on all transaction costs and management fees and full disclosure on where funds are invested.
The roundtable was organised to try and get industry consensus on ways to achieve this goal, interestingly the FSA were invited and although Hector Sands was unavailable, no one else from their huge number of employees was available to attend.
Industry speakers at the roundtable were:
- Harriett Baldwin – MP (20 year career in finance prior to becoming an MP in May 2010)
- Jasper Berens – Managing Director, Head of UK Sales, JPMorgan Asset Management
- Roddy Kohn – Principal of Kohn Cougar, IFA (25 years’ experience in the industry)
- Alan Miller – Founder, SCM Private
- Gina Miller – Founder, SCM Private
- Ed Moisson – Head of International Research, Lipper
- Richard Saunders – Chief Executive, Investment Management Association
- Charles Scanlan – Former Head of Pensions at the law firm Simmons & Simmons
- Joanne Segars – Chief Executive, National Association of Pension Funds
- Gareth Shaw – Deputy Editor, Which? Money
- Peter Sleep – Senior Portfolio Manager, 7IM
Gina Miller concluded, “We want to ensure that any system is fair and workable across the industry and we appreciate that this won’t happen overnight. At the same time, we do believe that changes are important for consumers and we think a sense of urgency is required. We are therefore aiming to put together a working committee that will meet over the coming months, with the aim of agreeing an approach by October 2012.
“If we can’t build that industry consensus, we will have to consider a wider range of options up to and including measures which may need statutory controls; in the best interest of consumers.”
The True and Fair Code
Company XYZ commits to providing clients with a full breakdown of all fees incurred during the investment of their money, including management fees and all underlying costs or charges.
Company XYZ commits to providing clients with a full online breakdown of all holdings held directly, as well as indirectly (e.g. individual assets held as collateral against securities lent out), together with a full percentage breakdown, online, on at least a quarterly basis.
Posted By: True and Fair, 6:48 pm