Raising the bar
Looking around it would seem that it is financial advisers who are shouldering the blame when an investment blows up.
The Financial Services Authority (FSA) is meant to be responsible for the regulation of financial services in the UK – but from our point of view, unless the FSA begins to take its responsibilities seriously and forces fund managers to properly reveal their full portfolio and the full costs, how can advisers be expected to properly analyse them and then advise clients? If an adviser or client can typically only see 40% of a fund online and often not even up-to-date, how is it remotely possible to analyse it?
Similarly, advisers are giving investment advice on fund labels designed by the Investment Management Association (IMA) which have turned out to be wholly misleading. But time and again blame is being laid at advisers’ doors when the labels do not live up to their promises and scandals ensue.
When you read the True and Fair Campaign Research Report it is shameful to see just how many of the major investment scandals take advantage of the elderly. These could have been dramatically reduced were the FSA to simply follow best international practice regarding transparency of fees and investments, rather than the bare minimum.
Many of these scandals have cost investors millions and advisers their businesses, or pushed up professional insurance and compliance costs. Yet no-one at the FSA has ever been held to account for allowing a retail fund to invest 25% of the total fund in Greek ships – Arch Cru; or failing to act on a warning from the chairman of KPMG well before the failure of Keydata; or most recently the failure to ensure client accounts are properly segregated (MF Global).
But it does not have to be like this. (article continues below)
The True and Fair Code we are proposing is a simple code that is aimed at restoring trust and professionalism in the savings and investment industry. The debate is no longer about whether there are there hidden charges or lack of disclosure or not; this has been talked about for years. The debate now has to move on to what is a practical and workable solution that will improve consumer trust and confidence, and enable advisers to undertake their jobs in a more informed and efficient manner. Our research has shown that with increased transparency and understanding, over 60% of investors would save more.
Of course consumers have a choice these days and if they do not trust the system they will increasingly bypass it and do it themselves. Recent research by YouGov found that since 2008, there has been a 50% drop in the number of people opting to work through IFAs.
Please join our campaign and force the FSA, the IMA and fund managers to improve transparency, reduce fraud and failure and thereby encourage the public to save.
Gina Miller is co-founder of SCM Private.