The complexity and lack of transparency on fund charges is not acceptable and has to change, say fund experts.
During a panel debate at the Morningstar Investment Conference today, three industry experts said the complexity and lack of transparency on fees continues to represent an obstacle in the fund management industry.
Hermes Investment Management chief executive Saker Nusseibeh says there is an overwhelming need to “simplify” charges. He says that it is not easy to regain clients’ trust, which has been damaged by asset managers making their products complicated.
Speaking after the panel session, Nusseibeh told Fund Strategy fund managers have been “hiding” from the fee debate by making their investment products complicated.
He says: “Asset management is a simple business but not an easy one. Fund managers felt embarrassed about the way they charge, so they’ve brought out a lot of products to make it appear complicated.”
The remarks come after UK Prime Minister David Cameron recently said complex fund charges are one of the reasons why investors are put off investing.
Gina Miller, founding partner at wealth manager SCM Private, says it is extremely surprising that the debate on fees is still ongoing after so many years.
“The fund industry is letting down investors by making charges too complex. It is essential advisers understand all the charges so they could make an informed comparison for their clients before making recommendations.”
Miller called for a single, mandated figure providing “one number” to cover all the fund costs of ownership, which should be updated on a monthly basis.
She says: “This is not a new industry. I’m very disappointed the FCA says clear charges don’t have to be mandated.”
Former Investment Association chief executive Daniel Godfrey says: “Cost makes a huge difference in the industry especially with the rise of passives.
“What we need is also not just to talk about transparency but also about all the regulation that made costs opaque.”