Blog: There is such a thing as too much transparency

Director-general of TISA Tony Vine-Lott asks whether our efforts to protect consumers could prove counter productive?

The complexity of financial services is boundless and, as a pragmatist, I’m frequently staggered by our ability as an industry to tie ourselves up in knots.

I happen to be a great believer in transparency as I think people should be allowed access to the detail that will enable them to make informed decisions.

Having said that, I do not believe that full disclosure, often the rallying cry of those who believe there is no room in the modern world for trust, is necessarily going to provide all the right answers.

Transparency can trigger fear among unsophisticated investors.

They look and hope for a simple explanation and speedy resolution of their enquiry and then, unsurprisingly, are blown off course by the quantity of information that greets them.

I have no doubt that many go away and do nothing as a result. Of course, at the other end of the spectrum, the investment cognoscenti who are unable to access the quality and depth of information that they believe they are entitled to can also get pretty upset when they run into a wall of obfuscation.

Trying to please everybody even some of the time is never going to be easy, especially when interests are unaligned.

As a cross-industry funded association, the Tax Incentivised Savings Association (TISA) volunteers to stand in the middle.

It may be as a means of communication between the FSA and a single financial services business type; or it may be as a conduit for information between a range of industry practitioners, with or without the involvement of external organisations.

TISA seeks to encourage discussion and to engage all the relevant parties at the earliest possible stage to ensure that when decisions are reached, it is on the basis that all possible information has been taken into consideration.

Revising decisions to establish new policy is significantly more arduous and time consuming than crafting a better policy at the outset.

For this reason, TISA recently stepped in to establish a project to address the topic of distributor influenced funds (DIFs), in which the regulated distributor firm retains direct or indirect ownership of the assets under management.

Regulatory and consumer groups that perceive the potential for conflicts of interest to arise have expressed their concerns.

The sponsoring firm receives a revenue stream from the fund, while also benefiting from increased capital value as a result of the fund’s assets under management.

It has also been suggested there may be consumer detriment through the operation of sub-scale funds, with attendant higher total expense ratios.

But this is just one side of the story. Why shouldn’t well-organised funds operating within sound business models have the potential to provide benefits to investors? We need to ensure that your views are taken on board as well.