The day when investors finally realise how much they are paying for their money to be professionally managed is drawing ever nearer.
After years of insisting that it could not be done, the Investment Association (which has given up any pretence of managing anybody or anything) came up with suggestions of how charges can be shown in pounds and pence rather than percentages.
Now it is suggesting how to account for transaction costs, differences between buying and selling prices, and turnover of stocks.
All of this should, eventually, lead to keener, more competitive pricing.
But I have got a concern. The latest IA paper is called Meaningful Disclosure of Costs and Charges, but how meaningful an investor would find it is open to question.
The stage is set in the opening paragraphs, in which the paper promises “to articulate an approach” which will be “a conceptual approach” and provide a “template for transaction cost disclosure”.
To do this you have to analyse your “portfolio turnover rate metrics”. And so it goes on.
Yes, I am sniping. But there is an important issue here. The financial industry is so steeped in its own jargon that it no longer knows when it is using it.
The financial industry is so steeped in its own jargon that it no longer knows when it is using itFaced with such jargon, consumers’ eyes tend to glaze over before they move on to something more interesting or intelligible.
If these changes are to be useful to consumers the data must be presented in a way that ordinary people can understand. They must also be provided with an analysis of it that makes sense to them.
My mother-in-law receives regular statements from an investment manager but they mean nothing to her. She does not understand what she is paying in charges or to whom those charges go.
In an ideal world she should be able to find a total cost figure within a minute of opening the envelope.
If transparency is the goal of the investment industry then plain English is a vital component.
The Investment Association’s document may be aimed at professionals but its language is indicative of an industry that has its tongue tied around its Ucits.
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A hoofer’s hoarding hints
If you have ever harboured concerns that your levy money is not being well spent then you can rest easy. You were absolutely right.
The Financial Services Compensation Scheme was tweeting breathlessly earlier this month. They managed to pin down that acknowledged money expert Bruno Tonioli who is famous for, errrr – being a judge on BBC1’s ßStrictly Come Dancing.
Forgive me, but if I want tips on football I would go to Gary Neville or Alan Hansen. If I want tips on dancing I might go to Mr Tonioli.
If I wanted tips on money, perhaps Moneysupermarket’s Martin Lewis might feature higher (sorry, but I cannot think of a celebrity IFA).
Let us see what Mr Tonioli has to offer: “If you earn 100, spend 50 and save 50.”
Fantastic. No tax, insurance, mortgage, university fees or bills to come out of that, then.
Second tip: “It’s very important to know that my money is protected by FSCS. If the worst were to happen at least I would get my money back.” Shame we cannot get ours back, I hear you muttering.
Incidentally, according to celebritynetworth.com, Mr Tonioli is worth an estimated $10m (£6.5m). He may be horrified to hear the compensation scheme limits are £85,000 for deposits, and he will get 100 per cent of only the first £50,000 of investments.
And the FSCS does not help with bad investments such as the £7,000 Mr Tonioli told the Daily Telegraph he lost in the dotcom bubble.
Never mind, at least your levy allowed the FSCS to uncover details of his favourite dance scene. I will not spoil the surprise – you can find it on youtube. Suddenly the BBC licence fee looks like a bargain.
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Zombie pensions
The deficit for defined benefit pension schemes stands at a record £367.5bn.
There has been a tendency to trundle along and think all is well since the introduction of the Pension Protection Fund. But these figures show the harsh truth that many surviving schemes are in reality the walking dead.
There must be concerns that some firms will do all they legally can to highlight the option to transfer out in order to reduce liabilities. But will members realise how much they are giving up if they leave a defined benefit scheme?
And will they be offered full value if they do transfer?
This is a situation that must be watched carefully by the government and regulators.
