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By Julia Bradshaw | Published Nov 24, 2011

TCF letter to David Cameron

The letter is in full, below.

Dear Prime Minister,

Hidden, excessive costs and unnecessary complexity are destroying UK investors’ returns

TCF Investment is writing to recommend in the strongest possible terms that the Government should commission an urgent, thorough and holistic review of the UK retail fund sector, akin to the Myners Review of institutional investment.

As we see the demise of employer-sponsored final salary schemes the retail investment industry needs to step up to help the individual fill the gap. This is a great opportunity to build future wealth and confidence for all. And with that opportunity is a huge responsibility – to be a guardian of the highest standard. To look after the savings of each individual with a skill, care and diligence as if our lives depended on it. Because people’s lives really do depend on it.

Today the industry falls well short. Left to its own devices the industry has slowly lost sight of the fact that the vast sums of capital inside products actually belong to real people. Layers and layers of ‘processes’ have been introduced - each of which add costs and creates potential conflicts. The innovation and skill of the industry has developed cleverer and more intricate ways to make profits – often leaving investors with small fraction of the return that markets deliver.

As market returns have fallen over the last 20 years the impact of high, hidden and rising costs allowed to be created by conflicts of interests and obscured by mind boggling levels of complexity is being exposed. Exposed by the lower than market returns revealed in the statements that investors open at their breakfast tables every ISA anniversary. Without intervention they may stop bothering to save.

The impact of these costs, conflicts and complexity should be sufficient justification for a full scale review in its own right. But the crucial importance to our country now placed on individuals saving and investing towards their future makes this review a social necessity. As I shared in a presentation to Treasury officials and FSA representatives earlier this week, the UK’s fund management needs more than a gentle nudge in the right direction.

Unlike other financial services products there is no price competition because the total costs of owning a fund is not understood to be a most crucial factor. And the true running costs of funds are invisible to all but the most ardent and expert investigator. Evidence from HM Treasury sponsored research would help arm consumers and advisers with the ammunition they need to act against industry excess.

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