Broad support for IMA plans to create better fund cost disclosure

Mark Blackwell MS blog
Daniel Godfrey

Investment Management Association plans for funds to reveal all their costs in a simpler and more transparent way in annual reports have been broadly welcomed.

Through a Statement of Recommended Practice for the annual report and accounts of UK authorised funds, IMA chief executive Daniel Godfrey is pushing for all annual reports and accounts of funds to display the performance of each unit held, the charge on each unit for managing the fund and the amount of transactional costs incurred on each unit.

Chase de Vere head of communications Patrick Connolly says: “We are still a long way from investors understanding what they are paying for. It is good the IMA is calling for this.”

Hargreaves Lansdown head of research Mark Dampier says: “We have supported it right from the start. Some of the unit trust pricing is quite opaque. It should be in the AMC [but] performance fees must be the most opaque thing possible.”

Any mandatory move to force fund groups to act would have to come from the FCA. An FCA spokesman says: “Ensuring investor clarity on fund fee structures and all charges is an important issue for the asset management industry.

“We support actions by industry bodies, including the IMA’s consultation on its SORP, to ensure that investors are appropriately informed of charges in relation to their investments.”

Since joining the IMA in October 2012, Godfrey has been keen to repair what he sees as a lack of trust from investors in the asset management industry. As part of this aim, he made cost clarification a top priority, first unveiling plans to do so in April 2013.

Godfrey says: “The initiative to provide a simple cost number that consumers can trust is a clear example of the industry going well beyond regulatory requirements to deliver to consumers something they need in a format that they can actually understand.”

However, Gina Miller, a founding partner of passive-focused investment house SCM Private which has campaigned for greater charging transparency, says: “What I find shocking is that the Financial Reporting Council is handing it over to the IMA. It needs to be done by a third party.”

Miller is also concerned the plans are limited to fund costs with no proposals to try to articulate the full cost of investing, including platform and advice fees. 

She adds: “The investor needs to know the total impact of costs on their pocket. The ‘stacking up’ needs to happen and investors need to know this prior to purchase.”