Calls for transparency

HiddenThe debate over fund charges has been reignited after the Investment Management Association in the UK criticised the models as fragmented and opaque.

Trust-based and contract-based investment schemes are currently governed by different regulators and rules in the UK. Elsewhere in Europe, certain regulation tends to vary from country to country.

Richard Saunders, chief executive of the UK trade body, said the industry needed to find “a way through this complex thicket” to help consumers to compare funds on a like-for-like basis.

“A good starting point is the ongoing charges model that has been adopted under European rules for retail funds,” he said. “This provides a single percentage figure which includes all charges levied as part of running the fund over the previous year.”

Saunders called for this model to be extended to other product types, including pensions. “Recent proposals by the European Commission seek to do that,” he added. “But euro-legislation takes time and this measure is expected to run into strong counter-lobbying so we do not know how it will finally come out.”

Claude Kremer, president at the European Fund and Asset Management Association, recently highlighted that the industry needed better comparability of products to make them more accessible and provide investor protection.

“The Ucits Kiid [key investor information document] should be generalised across the banking sector to include all types of investment products – Ucits or non-Ucits,” he said.

For investments to become more transparent, the various charges – ongoing charges on underlying investments, adviser fees and the charges applied by the administration platform – would have to be pulled together.

Saunders said this was naturally the role of the pension platform or provider, but other parts of the chain needed to be under an obligation to make the necessary information available.

©2012 funds europe