Opinion  

No room for complacency on EU advice cost intervention

Gill Cardy

But having ploughed through the 51 pages of recitals concerning the approved legislation it would be dangerous to get too complacent about any ‘victories’.

The length, density and cross-reference to other EU legislation would make even the most enthusiastic legal beagle weep.

Which is presumably why no one has reported on the imposition of the requirement for local regulators to provide a calculator. Individual investors will use this to compare what they might get back from various investments that they are considering.

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I quote: “The fund calculator shall include in its calculation the costs and fees charged by the various investment product manufacturers for any fund sold to the public, together with any further costs or fees charged by intermediaries or other parts of the investment chain, not already included by the product manufacturers.”

The recitals make very clear that while any reference to charge-capping may have escaped for the time being, the question of investor costs is still extremely high on the EU agenda.

In the same week that the FCA was given formal powers to cap the interest rates charged by payday lenders, the parallel is notable.

In both cases it is argued that the end consumer, whether investor or borrower, is extremely insensitive to pricing.

In the case of payday loans the urgent need or desire for the money in your pocket outweighs any serious consideration of the actual cost of the borrowing.

In the case of retail investments the cartel-like charging structures of fund managers means that most people assume that there is no difference between any of the funds, and in any event fund charges are not a subject for negotiation.

Additionally, in spite of RDR’s best intentions to help clients with the transparency of advice costs, the likelihood of clients like the Python character Brian using that information to “haggle properly” remains slim to negligible.

So while there is no advice price cap on the agenda right now, I would not assume that this issue has gone away. An online calculator brings the issue front and centre, and just like payday lending, if there is even the tiniest hint that advisers or providers are taking advantage of their clients’ insensitivity to price, I predict price controls will be back on the agenda quicker than the Python comeback gigs sold out.

Gill Cardy is managing director of IFA Centre