Hail the long-term investor

It helps enrich and empower long-term investors, enabling them to take control of their financial destiny in later life.

It has been doing this for 150 years, ever since Foreign & Colonial Investment Trust – still going strong today – popped up on the scene.

Indeed, it is a flag waver for the very best that the financial services industry has to offer.

A world leader – and we should be mighty proud of it. A slice of the financial services community that bar the odd scandal – think rogue trader Peter Young and Morgan Grenfell Asset Management in the late 1990s, think imploding split capital investment trusts (again, late 1990s) – has escaped with its reputation intact. Unlike the banking sector.

I prefer investment trusts because of the key role independent boards play in batting for investors

Unlike some, I am not polarised when it comes to support of any particular investment process – active or passive – or fund type (investment trust, unit trust or fund). All  camps have their merits.

Waitrose versus Lidl when it comes to active versus passive. If I had to come down on one side I would say Waitrose (most active fund managers are cerebral and half decent at their job).

I prefer investment trusts because of the key role independent boards play, especially when it comes to charges.

But the key is that the investment industry as a whole continues to strive to provide investors with best value for money – and the tools through which to build long-term wealth.

It is also fantastic that a vibrant investment platform market has developed as an adjunct to this industry, enabling investors to construct, build and change portfolios with ease.

To be able to see how their investment Isa, self-invested personal pension or share portfolio is progressing at any time of day or night. At the mere press of a button and the entry of a password or two.

Yet, no industry in this age of perpetual motion can stand still for long, none more so than the investment and investment platform sectors where ongoing regulatory intervention heightens the need for change and a greater focus on the investor.

This constant regulatory scrutiny forces both industries to keep delivering even better value for money for customers – whether it is through more competitive charges, greater pricing transparency (that triggers more competition) or delivering the service they claim to offer (for example, active rather than closet index tracking).

Slight shifts of the pendulum in favour of investors. 

The latest part of the regulator’s work has manifested itself in a number of proposals to improve the competitiveness of the investment platform market. It wants providers to address a number of key concerns.

These include high exit fees stymying transfers – and competition – between providers, opaque charges (making platform price comparisons nigh impossible), the promotion of model portfolios that are riskier than many buyers think, and the poor deal that investors get if they hold large cash balances on the platform.

If platform providers do not make immediate progress in tackling these issues, the regulator is prepared to get tough with the introduction of a number of ‘remedies’ it will outline early next year.

Hopefully, the platform market will respond in a positive fashion and give investors a better deal.

The platform market should look no further than the investment trust industry for evidence of real progress in the best interests of investors.

Rarely a week now goes by without the board of at least one trust announcing a reduction in the fees that the investment manager can take for its services.

The latest is Fidelity Special Values, a trust set up in 1994 to showcase the investment skills of the now retired Anthony Bolton.

From this September, an annual charge of 0.875 per cent will be replaced by a two tiered charging structure, resulting in a 0.85 per cent fee on the first £700m of net assets and 0.75 per cent on any sum above.

Of course it does not constitute monumental change but it is progress for the better – an acknowledgement that investors deserve a fairer slice of the cake.

It would be great if similar tiered pricing were adopted on big £1bn-plus unit trusts and investment funds.

For the life of me I cannot see why it is not possible. Am I wrong? (let me know if so).

If there was one measure I would like to see introduced more than any other, it would be a requirement for all funds to publish an ongoing annual charge expressed not just as a percentage but in pounds and pence.

At the drop of a hat, this would highlight the rich coal many asset managers are still mining from our investments – and through disclosure put pressure on them to reduce the scale of their mining.

Indeed, this principle should be extended to investment platforms with a requirement every year for providers to furnish investors with details of the charges for having their investments on the platform – expressed in both percentage terms and pounds and pence. That means all costs be they fund, platform or adviser levied.

Jeff Prestridge is personal finance editor of the Mail on Sunday