Transparent: adjective; 1: easily seen through; 2: evident, obvious; 3: easily understood, frank, open.
Relate that to the accusations that have been levelled at our industry over hidden costs, kickbacks and misselling and you would argue that as an industry we fail to deliver transparency.
Transparency is becoming one of the demands of consumers. Rather than being sold to, customers want to engage and understand what they are buying. Individuals want to know the ins and outs of who they are dealing with. They are looking for partnerships.
Transparency is also a demand of advisers. You need to know if there are conflicts in the services you use. You want to understand that the organisations you deal with are open, accessible and do not create issues for the services you provide. You are looking for partnerships.
Over the last few months, we have had significant feedback from investors and advisers who felt there were elements of the platform market that were failing to deliver transparency. As an organisation, we strive to be open and honest and responsive to our customers and wanted to respond to these demands to provide more transparency.
Under Mifid, every platform must declare its charges but most insist this is done on request. The step we have taken to be more transparent with our charges is driven by the belief this is vital information needed to make informed investment decisions. It is a small step and, like much of the industry, there are many other areas we should look to ensure are more accessible and more transparent.
I believe it is not just an understanding of the breakdown of costs that is important, it is also the total summation of the costs. Increasingly, costs are being unbundled in a way that may lead to a no-frills-airline-like comparisons. Understanding the total cost of ownership of a product is vital and we must ensure any increase in transparency does not simply lead to the customer not knowing what they pay in total.
This is something the fund industry must look at. The increased use of passive funds and other perceived low-cost solutions are in danger of failing the transparency test by failing to show what the total cost of ownership is. Only by adding the costs of the platform and advice do you get to the representative cost of these products.
I do not believe the actions we took last week were revolutionary and it should not be big news when someone is being more transparent. It should be the standard for how we operate. We should all look at our businesses to look at how we make them more transparent and accessible to our customers.
Ed Dymott, head of commercial at Fidelity International
David Ferguson, chief executive, Nucleus
“There is a long way to go before the entire market is exposed and we may have to wait a very long time before some of the life company and fund supermarket pricing models become properly understood. But for now I am going to enjoy this moment. The wheels are turning in the right direction, whatever brakes some providers continue to apply.”
Sam Macdonald, wrap and distribution reporter, Money Marketing
“Skandia says it cannot reveal the figures because of contractual agreements it has entered into with fund managers. I managed to get hold of a copy of details of Skandia’s income from fund managers from 2009, which the firm says is now ’significantly’ out of date.
“The list makes interesting reading, with most popular funds offering a payment of between 0.8 and 0.9 per cent, including adviser trail, so between 0.3 and 0.4 per cent was being kept if you take away an average trail of 0.5 per cent.”