Fund managers in talks with regulator over clarity on fees
Britain’s fund managers have begun talks with the Financial Conduct Authority over better disclosure of their charges and transaction costs, just five months after angrily ousting the head of the trade body who pushed for such a move.
The Investment Association, which jettisoned Daniel Godfrey for his “narrow and aggressive” reform agenda, said it would develop a common framework with regulators and insurers to “ensure customers get a consistent and meaningful set of information” about the costs of investing.
Currently, pension fund charges are subject to both UK and EU regulatory requirements, but millions of pension investors do have not a clear idea of what their costs are.
“What we want from an industry perspective is to proactively join the UK and EU regulatory requirements together as far as we can,” said Jonathan Lipkin, director of policy at the IA.
”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.”
Mr Lipkin said the IA wants to launch a consultation on its draft disclosure code for pension fund charges towards the end of this year.
“We are seeking people’s views,” he added. “It is not a question of our industry building and designing without consulting those who are going to use it.”
The development comes five months after Mr Godfrey, former chief executive of the IA, was ousted after pushing for greater transparency on fees and charges borne by investors.
“This is a project that I initiated back in 2014 when it became clear that I wasn’t going to get my way in forcing disclosure of the split between research and execution costs bundled into dealing commissions,” said Mr Godfrey.
“The objective (now) should be complete accountability for every penny spent and for the friction incurred by spreads as a consequence of portfolio turnover.”
The move comes ahead of the publication of a study this week which concluded that fund managers could move faster to bring hidden pension charges into view.
The study, commissioned by the Financial Services Consumer Panel, an independent advisory body to the FCA, found there was little justification for fund mangers in not handing over charge information.
“There is information that is readily available to fund managers now that could be reported to pension scheme managers,” said Teresa Fritz, a member of the FSCP.
“Pension trustees and independent governance committees need this information to meet their duty to assess value for money for members.”
Ms Fritz said the research had shown that a standard format for data collection of pension charges could be “implemented quite quickly”.
”This is about getting fund mangers to surface all of the available costs in a format that would let trustees have a better grasp of what they are paying for,” said Ms Fritz. “If the format was mandatory, it would be something that trustees could rely on.” The FCA declined to comment.