IMA: Ill-informed critics damage savings industry
You would be forgiven for feeling slightly depressed after a quick scan of newspaper headlines these days. We are all doomed – whether it be the state of our finances, the healthcare we receive or the standard of education in our schools.
And as for the financial services industry – why bother with them? The Labour party played a blinder earlier this month when it used some questionable and misleading data to generate yet more negative headlines about pensions – including the now well-played out argument that hidden costs are draining money out of peoples’ pensions.
And hot on its heels came a report from the RSA, again using inaccurate data to fuel the flames further.
Well-informed debate is always welcome but scaremongering in this way is neither welcome nor helpful.
As we are on the verge of auto-enrolment, politicians and the industry should be encouraging people to save for retirement instead of undermining the good work which has gone into giving millions of low-paid workers the opportunity to save into a pension, many of whom will be doing so for the first time.
Given this backdrop, it is not surprising that many people feel less than warm towards the financial services industry. The investment world is not all bad. But the industry – including financial advisers – has an uphill battle to persuade people of this fact in the face of such hostility.
The fact is that there are transparent and well-regulated products out there and we should not forget them lest we forget the benefits they can bring.
Investment funds have helped tens of millions of people around the world to contribute to a better financial future for themselves. For people with modest amounts of money, funds are a simple way of gaining access to the capital markets, the benefits of professional fund management and diversification. And this comes at a relatively low cost compared with DIY investing.
With the best will in the world, we know that the new auto-enrolment scheme will only be able to offer people a basic foundation for their retirement savings. They will need to save over and above that if they are to have a comfortable retirement. And funds are one way of helping them to do just that.
The hope is that once people are auto-enrolled and start receiving statements about the pot they are building up, they will be encouraged to think about topping up their pension saving with other investments.
But first we must counter the myths and restore trust. Although the fund management industry firmly believes in its products and takes issue with claims about hidden costs, it is willing to step up to the plate and consider what it can do to help consumers.
That is why we recently published draft guidance to our members on better disclosure of all costs associated with investing. We hope that will help to allay some of the concerns.
And mindful of our responsibility to help people understand more about investing, we will shortly be launching a new consumer website.
The concepts of collective investment and saving for the long term are simple. They should not be mired in dispute.
Mona Patel is head of communications at the Investment Management Association.
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