Campaign to tackle 'opaque' fund charges launched

A campaign designed to tackle what it sees as opaque charging structures in the UK investment management industry was launched today by boutique wealth manager SCM Private.

The True and Fair Campaign calls for the government and regulators to approve and mandate a 'code and labelling' scheme which would ensure customers are provided with product information in a "consistent, unified and understandable" format.

It wants a guarantee of 100% transparency in respect of where clients' cash is invested, and of the underlying costs of all investments.

"A lack of transparency throughout the investment management industry, together with layering of costs, product complexity and use of convoluted language has led to a loss of consumer trust and confidence", the campaign manifesto reads.

"This is not an issue that only affects a small number of wealthy investors, but includes many millions of ordinary British savers and pensioners."

Investors, advisers and other stakeholders are asked to sign up to the campaign and write to their MP and Treasury financial secretary Mark Hoban.

Alan Miller, founding partner and chief investment officer at SCM, said it was "completely wrong" for the Investment Management Association (IMA) to carry out duties including labelling funds, which he said must be done by an independent body.

"If you allowed manufacturers in the cigarette industry to make the labels, they would say ‘smoking improves sex'," he said. "Labelling should be done by an independent body."

Accusations of so-called 'hidden' costs across the investment management sector have split the industry.

This morning, Gary Shaughnessy, the managing director of Fidelity UK, called for a new fund charges disclosure method called 'total cost of ownership (TCO)', which he said should replace all existing charge information provided to investors and advisers, such as the Total Expense Ratio (TER).

He told BBC Radio 4's The Today Programme all the costs of a fund - including dealing costs and any government tax such as stamp duty - should be included in a new charge.

The TCO would tackle what Shaughnessy said was the "increasingly complicated" way fund charges are being expressed.

But the IMA does not believe pure transparency would necessarily benefit investors.

IMA chief Richard Saunders, writing last week, said including trading costs in fund charges could be misleading, as investors might mistakenly believe the costs of trading are not linked to investment returns.