Few people will have failed to notice the barrage of advertising by the investment industry over the past few months. Research published by AC Nielsen reveals that providers spent £15.9m on ads in January and February – 25 per cent more than in the same period last year.
But while advertising is gaining in volume, it appears to be falling in quality. Lucian Camp, chairman of ad agency CCHM, recently criticised Isa ads for their “dreadful dullness” while labelling Isa marketing strategies “dangerously simplistic”.
Worse, some fund managers are spinning past performance figures to show their funds in a better light than perhaps they deserve.
In October, Money Marketing highlighted that Scottish Widows Investment Partnership was still advertising the long-term performance of its European fund despite the departure of star manager Albert Morillo nine months previously. The ads boasted how £7,000 invested in the fund in 1995 would now be worth £85,190.
Yet they failed to mention that, since Morillo left, the fund had started to trickle down the performance tables. Over the year to date, the fund is ranked 80th in the Europe excluding UK sector while Morillo's new fund – the Investec European fund – is sitting comfortably within the top 10.
Swip insists the fund has always been managed by a team approach, hence it has the right to boast its fiveor six-year performance. Yet, while Morillo was managing the Widows fund, Swip was keen to promote his name.
Six months after Money Marketing reported the story, Swip continues to run its European ads without any mention of a manager change.
It is by no means the only culprit. When Merrill Lynch Investment Managers rolled out its UK dynamic fund six months ago, it was keen to boast of the performance of fund manager Peter Davies, who also managed the Mercury OST fund, from which it was to be cloned.
MLIM has centred its Isa season campaign on the fund, boasting its strong past performance and Standard & Poor's AAA rating. But even the most recent tranche of ads fail to mention that Davies left two months ago and the fund's rating is under review.
Part of the problem is the lack of regulation concerning the use of past performance in financial advertising. Although fund managers are obliged to warn that past performance is not necessarily a guide to the future and that investments can go down as well as up, this is largely where the regulator stops.
Broad clauses also stipulate that advertising must not be misleading but the FSA is yet to challenge the likes of Swip or MLIM.
However, the FSA is conducting a review of the use of past performance data across the board, not just in advertising. Having published an occasional paper last August, which was scathing about the relevance of past performance, the first indications are that the regulator is set to take a heavy hand when it reports this summer.
Its forthcoming comparison tables will almost certainly not include any past performance data. Although it is likely to stop short of banning advertising past performance, it will no doubt lay down stricter guidelines.
Currently, it seems to be up to the media to regulate financial advertising.
Jupiter recently started including footnotes on its posters pointing out which funds have seen changes of manager.
It is strongly tipped that this type of change will be the first measure that the FSA will impose on fund ads.
But steps beyond this are likely to receive a frosty welcome. The assertion that past performance is irrelevant is still refuted by the fund management industry as well as trade body Autif.
From the fund manager's point of view, the logical conclusion of the argument is that fund management is entirely down to luck. But it seems unfair if consistently successful fund managers cannot show the results of a tried and tested approach.
Last month, Citywire.co.uk launched its Funds Insider website, which ranks the performance of individual fund managers, following them through changes of fund and company. This gives a much stronger impression of which managers have outperformed markets consistently rather than got lucky by being in fashionable markets at the right time.
Citywire believes this sort of data would be a honest and transparent way of advertising performance although it concedes that firms are unlikely to want to boast of their managers' records while they were at other investment houses.
The FSA's actions this summer may not address Camp's concerns over the dullness of Isa ads but may at least tackle an element of the simplicity of which he complains.
Manipulated and misleading figures are frustrating for IFAs, who often battle to overcome thoughtless and spontaneous investing by consumers. All eyes are turned to see what the FSA can come up with.