fund industry trade body the Investment Association said yesterday it was making a fresh push for clarity over the fees charged by asset managers amid regulatory pressure for investors to get a better deal.
The move comes as regulators in London and Brussels discuss what form information around costs should take, particularly as it relates to the revised Markets in Financial Instruments Directive, or Mifid 2.
That builds on work already done in Britain through the unbundling of trade and research costs as part of the Retail Distribution Review. In a white paper, the IA said it wanted to give a framework for charge and transaction cost disclosure that could be used across different products and form the basis for a common template, once the shape of regulation becomes clearer.
In a statement, IA chief executive Daniel Godfrey said there was “lots of heated discussion” on the topic of costs, some of which was “dis-informative and over-emotive hyperbole”, although he added the industry could do a better job of explaining them.
While the UK industry already had to detail pounds-and-pence-per-unit cost figures in a fund’s accounts, the IA said its new proposals looked to build on that initial step, by giving more detail and in a more easily digestible format.
Also, performance fees and one-off charges like entry and exit fees should always be shown separately.
“We think this will avert a continuation of the trap we’ve all fallen into over the last twenty years with disclosure that nobody understands at best and which can be misleading at worst with spurious assumptions of accuracy being made that could lead to real consumer detriment,” Godfrey said.
The IA has also included a proposal for a diagram showing investors a fund’s portfolio turnover rate and how it compares with peers, along with the relative cost of its transactions.
All of the disclosure proposals put forth by the IA will depend on the outcome of two in-progress regulations: an FCA and Department of Work and Pensions disclosure schedule for transaction costs in auto enrolment pensions, and the Mifid and Priips EU directives.