Advisers back call for transparency of investment fees

SCM, which launched the True and Fair Campaign www.trueandfaircampaign.com on 31 January 2011, reveals that 78% of independent financial advisers surveyed believe that fund managers should be required to disclose the full breakdown of all fees incurred when investing a client’s money.  

The findings support other recent research by SCM among savers and investors showing that 89% would like fund managers to disclose a full breakdown of investment fees.   SCM has calculated that one of the largest hidden elements – dealing costs – amounts to £2.7 billion per annum in UK retail funds alone. Using the same assumptions, these costs would be £18.5 billion per annum in the whole UK savings and investment industry.

SCM warns that unless fund managers take notice of the groundswell of support for greater transparency of investment fees, consumers will continue to vote with their feet.  SCM believes the growth in direct investments is partly fuelled by the mistrust of the current system, and partly by the sense of empowerment afforded by the Internet.  

SCM’s research reveals that three fifths (60%) of IFAs believe their clients would be more inclined to invest in ISAs, pensions or investment/mutual funds if they could see fully where their money was invested.  

Likewise, almost two thirds (64%) of IFAs report that their clients feel  the amount they pay in management fees and transaction costs for their investment and pension products is important; with 23% saying this is ‘very important’.  In contrast, just a third 33% of investors are either ‘mostly’ or ‘fully aware’ of the fees and charges that they are incurring on their investment and savings products.

Gina Miller, founding partner, SCM Private said:

“The overwhelming majority of financial advisers recognise the need for 100% transparency of investment fees and it’s time the industry fought the sleepy status quo in order to provide customers with product information in a ‘consistent, fair and understandable format’. 

"The industry should show that it has evolved and changed to meet consumer demands regarding transparency of fees and investments, which in turn would transform the UK to be the leaders rather than the laggards in transparency.

“It’s clear from recent conversations that many fund managers are scared to reveal the full costs and frightened of how this would affect their profit margins.  But the same margin pressure is inevitable if they do nothing as investors will increasingly decide on the DIY option.   Many fund managers fail to recognise that it is in their medium to long term interest to behave ethically and honestly, thereby encouraging consumers to save more.”