Join our campaign to fight fund managers’ high fees and lack of transparency
IT IS time to give investors a better deal. That is why SCM Private – the wealth managers of which I am a partner – is today launching a campaign proposing a True and Fair Code and Universal Labelling system for all UK investment products. Through this scheme consumers would, for the first time, have the ability to see the full costs of their investments, from top to bottom. The scheme would also enable consumers to compare one investment product with another on a like-for-like basis: be it a pension, unit trust, investment trust, exchange traded fund or a direct managed portfolio.
The proposed Code and Labelling Scheme is based on an accountancy concept in existence since 1948. It puts the onus on companies to produce true, fair, accurate and consistent information. The report and accounts template means accountants can set out all the underlying costs and revenues to derive one important number, the profit. The workings are presented in a consistent layout with details available if required. The numbers are meant to reflect the underlying picture. We feel it is time the investment and savings industry did the same.
Ask yourself how much profit Tesco made last year and you will be told one number. Ask how much an investment costs and you will be told 5 to 10 different numbers, some in pounds and some in percentages. This explains why consumers simply do not understand how much their investment is costing them. People should know this before, not after, they hand their money over. Most of the information we are calling on investment companies to display is already available, but consumers have to play hide-and-seek among a myriad of documents to find it.
We believe that if, as an industry, we adopt this code, trust can be restored. Investors will be able to make informed investment decisions. Consumers today expect more and have a right to know as much as they do in most industries. As an industry we can no longer afford to be complacent. That is why we want companies to join us and become True and Fair Champions and develop this code.
Technology has shifted the power balance between consumers and businesses across the economy. This feeling of empowerment is changing customers’ mind-sets and expectations. In this new age of online information and 24-hour media, customers expect to have up-to-the-minute information available to them in every sector. But UK fund managers, generally speaking, have not embraced this change. Every retail fund manager operating in the US has been providing full disclosure at least every quarter online since 2004. There is no excuse in the UK not to match this standard – let alone go beyond it. It is simply not good enough to only let investors know what it is they own just once a year. Clients have a right to know where their money is invested more often, in full and via the internet.
If this industry is to have any long-term future it needs to examine what is it that we do and what we can do better. We need to ask if we are good enough at communicating that? And most importantly, are we rigorous enough in terms of transparency? If we do not meet the basic standard, people will simply invest directly via the internet and we will lose our relevance.
There are those who say there are not transparency issues or that transparency would put off investors, but to our mind this is disingenuous. It is their money; they should be able to make fully informed decisions. Independent research we commissioned in December of last year across a wide segment of investors showed that only 12 per cent knew exactly how much they were being charged and for what. This is an appalling state of affairs.
We are not going to apologise for using tough language throughout this campaign because there has been much talk about transparency but nothing has changed for years. Even those companies who profess transparency have not been applying it systematically across all their products. This is not a debate about costs alone – although it is a vital component for consumers to receive a better deal through increased provider competition – it is about consumers having the right to make fully informed decisions.
Transparency was never an issue when markets went up over 15 per cent year-on-year and the internet did not exist. But now the entire financial sector is under public scrutiny and we need to change, not bury our heads in the sand and hope these issues magically go away. Trust is dissipating and fast.
We need everyone to become engaged to effect change. Please join us.
Gina Miller is a founding partner of SCM Private. You can register to vote for change at: www.trueandfaircampaign.com.