AIC to demand higher IT fee disclosure standards

The trade body is consulting with experts and member firms over a clearer way of reporting the fees that fund investors pay, echoing mounting calls in the open-ended fund industry for higher disclosure standards.

Ian Sayers, director general of the AIC, said the trade body was also considering lobbying for the UK’s conventional total expense ratio (TER) measure of fund fees, which has been criticised for not including investment dealing costs, to be scrapped.

“Where there are a range of costs that consumers are exposed to such as exit/entry charges, platform charges and underlying dealing costs, we need to find the best way to present those,” said Mr Sayers.

The AIC’s stance on TERs is in direct contrast to the position of open-ended trade body the Investment Management Association (IMA), which is continuing to insist that current disclosure standards under EU and FSA rules are sufficient.

The issue was under the spotlight recently as both fund giant Fidelity and boutique SCM Private, headed by Alan Miller, have proposed separate new standards of fee disclosure that include items such as dealing costs. BlackRock, HSBC and Legal & General Investments have also sided with calls for clarity.

Mr Sayers said fund managers were now being obliged to publish an ‘ongoing charges’ measure of fees under European disclosure rules that oblige managers to produce Key Investor Information Documents (Kiids). They must also publish TERs under FSA rules, leading to a “confusing” situation for investors, according to Mr Sayers.

“I do think ongoing charges is a slightly better way of saying it. What we are trying to tell people is these costs are looking back in time,” Mr Sayers said. “These charges are ongoing and give investors an idea of what they can expect to pay.

“Investors want to know this detail. This is the basic information that they should have.”

Mr Sayers said the AIC had been supportive of unbundled charging structures so investors are able to see exactly which different parties are being paid out of their investment capital.

“You often get the best deal by shopping around and consumers of funds should be able to do that,” he said. “We should show each charge separately, so what the charge is for the platform, for the adviser, for dealings.”

However, Mr Sayers said more discussion was required before the industry could adopt new fee standards due to the complexity of agreeing common standards.