Money managers may be forced to come up with a single annual fee that gives customers a clear indication of the actual costs involved – and exposes the additional costs charged by investment managers.
The Financial Services Consumer Panel, which advises the UK’s Financial Conduct Authority (FCA), has recommended that fund managers disclose how much they actually charge to manage £5 trillion of capital, which the estimated total assets managed by British fund management companies last year. Around 1.4 trillion of the 2013 total came from pension funds, and a further 1 trillion from retail investors.
The panel believes that the figure given by money managers could be as little as a quarter of the fees that are actually charged to clients, as investment managers often deduct a number of other hidden charges directly from the fund.
“Investment managers in the UK have stewardship of £2.4 trillion of retail consumers’ money, including through pension funds. Poor disclosure, weak governance and multiple conflicts of interest mean that competition in the investment market is not working in the best interests of consumers,” said Sue Lewis, Consumer Panel Chair.
“The problems our research has identified are long standing, and need fixing urgently. People are depending more and more on investment to deliver their long-term financial wellbeing, especially in the light of the recent pension reforms. It is completely unacceptable that consumers do not know what firms are charging them to manage money on their behalf, and cannot compare different offers. While we recognise that the industry is working to improve disclosure, this does not go far enough.”
The panel believes that having access to a single figure will help investors to compare rates and costs, and will boost efficiency among money managers.