Daniel Godfrey: Asset managers must address opaque pricing

Godfrey Daniel Investment Association 2015Asset managers need to give investors a single price for investment products, separate from trading costs, to boost transparency in the industry, says former Investment Association chief Daniel Godfrey.

Speaking at the Transparency Symposium, Godfrey, who is currently non-executive director of Big Issue Invest Fund Management, says asset managers can use transparency around charges as a competitive advantage.

He says: “Transparency is an absolute requirement to build trust and it is a source for competitive advantage.

“We need more transparency in the difference between explicit and implicit costs so a consumer can see the difference between costs paid to professional agencies to manage portfolios and the costs of doing it themselves.

“I think agencies should have a single charge expressed in a percentage including the research costs and taxes but separate from trading costs so consumers can make an informed choice on the providers.”

Godfrey says a lot remains to be done to increase transparency and trust in the asset management industry.

“It is difficult to go through the accountability of a fund and understand the costs. At the moment it is difficult for consumers and authorities to trust providers.”

Godfrey had pushed for more transparency on fees while at the helm of the Investment Association, through the Statement of Principles.

However, the Investment Association has since pushed back the deadline indefinitely for member firms to sign the statement, after asset manager voiced concerns.

Transparency in asset management is essential, but it is not enough to build consumer trust, says Godfrey: “Whilst transparency is absolutely a necessary condition to build trust it is not sufficient in itself. It is one element but not the only one.

Asset managers have the responsibility to use their “skills, knowledge and experience to deliver that mandate at the lower possible cost”, he adds.