Fidelity calls for fund transparency amid Ryanair pricing concerns

30 January 2012 2:14 pm | By Chris Salih

Fidelity Worldwide Investment has called on the asset management industry to create an industry standard in a bid to offer to greater transparency for fund charges.

The asset manager says the industry must work together to develop a standard approach to disclosing the total cost of the fund.

Fidelity Worldwide Investment UK managing director Gary Shaughnessy says the industry has begun to see “selective and partial” Ryanair charging start to emerge which runs the risk of misleading investors on the real cost they are paying.

He said: “A consistent way of showing charges is essential to restoring investors’trust in the industry and encouraging them to feel confident to save for the future. Investment funds can provide a cost-effective way for investors to benefit from stock market growth and achieve their longer term goals.  

“However, a lack of clarity around costs is distracting from the real benefits that investing in funds has brought to millions of people in the UK and around the world. The communication of these charges needs to be more accessible to investors, visible at the point of purchase and brought into real “pounds and pence”terms.”

Fidelity says that an analysis of the most popular UK funds available on FundsNetwork found that outside the initial cost of investing in the fund in the first place, the average cost of owning £10,000 in an average actively managed fund was £16.67 a month or £200 a year.

Shaughnessy says some companies are not showing the cost of advice or the cost of the platform that investors may need to use to access the fund. He says others have high minimum investments and are only available to high net worth individuals.

He says: “There are a lot of headline figures currently being bandied about but they do little to help investors understand the true cost of investing or to evaluate whether these costs are fair and reasonable for the service they are receiving. What will really help investors is a transparent and standardised cost breakdown in pounds and pence.

“Of course, investors should not focus on cost alone as, although the return earned by an investor will of course be impacted by charges, it will not be the final determinant.   What a fund invests in, how the manager invests and the tax advantages available via some products can be even more important.”

Bestinvest hit back at the Investment Management Association last week after it released research which claimed there were no hidden fund cost charges.

The trade body analysed the fund accounts of 129 active and passive funds in the UK all companies sector. For the actively managed funds, the transaction costs were 0.31 per cent of average assets, of which two-thirds was accounted for by stamp duty. In tracker funds, transaction costs totalled 0.06 per cent.

Bestinvest senior adviser Adrian Lowcock says: “What the IMA seems to be focusing on is whether the funds are expensive and offer fair value, but the issue for investors is they cannot work out whether funds are expensive because they are not told what all their charges are and what exactly they are paying for. Charges are not clear or transparent.”

Investment Management Association chief executive Richard Saunders says: “It is a thoughtful and constructive contribution to the debate about fund charges which we will consider carefully.”

 

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