Scaremongering won’t help to get people saving

John Kenchington

SCM Private, the boutique co-founded by ex-New Star magnate Alan Miller, is a firm that’s coming up in the world.

Based on London’s exclusive Eaton Gate, a stone’s throw from the opulent Sloane Square, reports last year claimed it was closing in on its first £100m just four years after launching.

In addition to great performance on its three low-price funds, SCM has shot to fame thanks to its ‘True and Fair’ campaign against fund industry fee practices.

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The campaign is spearheaded by SCM’s marketing tsar and co-founder, Alan’s philanthropist wife Gina Miller. Its objectives – fee transparency, truth and integrity – are laudable and, to be sure, it has delivered vast amounts of free publicity for SCM.

But last week it went further than ever, calling for the OFT to probe fund managers, stunningly accusing them of cartel-like, rip-off pricing practices. This generated a blizzard of national headlines.

Let’s be clear: I have long advocated fee transparency and called for an end to the herds of second-rate, waste-of-money funds out there. But as easy it would be to simply churn out the sensational headlines too, I take issue with the research methods in SCM’s report.

One headline-grabbing claim is that UK funds are 58 per cent pricier than in the US. This was based on a ‘general’ price for the old, bundled UK share classes, which often charged 1.5 per cent, versus 0.95 per cent apparently charged by US funds, but that figure appears to be unattributed and it’s unclear if it includes platforms/advice.

As we recently revealed, nearly 50 per cent of UK advised platform assets are now in cheaper clean-fee shares anyway and with the rise of even cheaper ‘superclean’ deals the market will get cheaper still.

The report claims post-RDR costs will rise by 28 per cent as clean-fee savers will face platform fees of 0.35 per cent and 0.82 per cent for advice on top of 0.75 per cent clean-fee prices. But the new adviser cost was based on a 2013 survey of just 79 adviser firms discussing £100,000 portfolios.

The platform figures were based on a media report on direct-consumer Isas – not relevant here. When answering some points for Investment Adviser, Mr Miller later provided a 0.38 per cent estimate for B2B platform costs, but it was based on a small number of platforms. Both estimates are based on a £50,000 portfolio – savers with more will pay far less.

The report has its merits, but the fact is every client is different and the US market is vastly different to the UK. Only exhaustive, double-blind, peer reviewed research could establish these comparisons scientifically.

My problem is that while True and Fair itself warns of “worryingly” low levels of interest in investing, scaremongering headlines based on reductive research can only exacerbate this.