From the Ed: Yet more proof that advice really is king

It’s not difficult to imagine what your typical retail fund investor might say if asked whether he or she believes they are being charged fairly (especially if you know this person reads the Sunday papers).

So not difficult, in fact, that I needn’t write it here.

New claims of ‘hidden’ fund charges hitting investors in the pocket were enough this week to prompt IMA chief executive Richard Saunders to blog on the subject (again).

Saunders’ chief gripe on this occasion was what he sees as a growing but misguided campaign for asset managers to include trading costs in fund charges.

Under the headline “Hidden costs? What hidden costs?”, Saunders wrote: “[That] would mislead investors into thinking that trading costs matter in isolation from their impact on investment returns.”

Saunders was communicating the point that the costs of trading within a portfolio are directly linked to its performance, so to split the two, even in marketing literature, may give investors a skewed idea of whether they are getting value for money.

Or, in short, real transparency would be unhelpful.

But neither I, nor plenty of readers of this publication, can agree. Is it acceptable for an industry to keep true cost from investors because it believes it is for their own good?

Advice is king. What the IMA should really be doing is mandating the full, unlimited breakdown of all retail fund charges and encouraging investors to seek out professional advisers if they do not understand them or are unsure if they are fair.

How can advisers be expected to do their jobs properly in this world of partial non-disclosure?

Meanwhile, ‘sophisticated’ investors (if they merit that particular badge) can continue as normal.

Asset manager Fidelity Worldwide Investment, no doubt spurred by Saunders’ remarks, has called for an industry standard to bring greater transparency to investment charges.

It said investors should be able to see the total cost of owning a fund – including fund, distribution and stock dealing costs as well as platform administration charges – and compare different products.

Fidelity is right. Total disclosure is necessary for investors and for advisers. Now will someone please tell Richard.

Scott Sinclair Editor, Professional Adviser and IFAonline.co.uk