The Financial Services Consumer Panel has published a new standard for asset manager fees that it says is quicker and easier to introduce than impending European rules.
Pension providers and asset managers are under growing pressure to boost transparency as result of Mifid II, Priips and the creation of Independent Governance Committees for workplace pensions.
The panel’s standard – based on research by Stonefish Consulting managing director Christopher Sier – will be broken into pension fund costs incurred by the scheme, asset management costs delivered by each manager and custody fees.
The panel has proposed a template covering the fees investment managers charge as well as costs incurred in capital markets, including implicit trading costs.
Sier concedes the proposed model does “not represent the entirety of costs” but would be “relatively quick and easy to implement” compared to the tighter standard suggested in Priips.
Siers adds that a voluntary code with regulator guidance “is the best way forward”.
He says: “The alternative is to impose something that might be extremely expensive and complicated to deliver whilst bringing us no nearer to the prize of full transparency and accountable asset managers and other service providers.”
Financial Services Consumer Panel chair Sue Lewis says: “The problems of cost opacity and conflicts of interest in asset management are well known and long-standing. We are always being told there is a solution just round the corner, whether it is European legislation or the work DWP and the FCA have done on transaction charges.
“While the direction of travel is welcome, millions of pension savers are still losing out year after year by paying too much in unseen costs and charges. We are recommending a small step that could be implemented quickly and make a big difference to tomorrow’s pensioners, without prejudicing more far reaching change to come.”
The Investment Association has backed the move and has convened a panel of experts from member firms to update to the industry’s cost disclosures. The new Code for costs and charges disclosure will closely mirror the FSCP recommendations.
Investment Association interim chief executive Guy Sears says: “The alignment of the investment industry and consumer representatives on the future of charges and costs transparency has never been higher.
“The FSCP report supports the Investment Association’s views on mechanisms for the next generation of transparency, and is in line with our expectations for the new levels of disclosure to be introduced under European rules planned for the future.”