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ETFs pose threat to opaque funds

Advisers say the rise of ETFs will be a major threat to underperforming opaque funds run by life companies and high-charging tracker funds.

Hargreaves Lansdown investment adviser Ben Yearsley hit out at poorly performing insurance company funds that lack charging transparency. He said: “There are so many useless funds managed mainly by life companies that should be shut down. These and tracker funds have a lot to fear from ETFs.”

Seven Investment Management director Justin Urquhart Stewart said insurance packaged funds need to be more transparent on costs. He said: “You have got insurance company funds where you have no idea what the costs are. The RDR will show that a lot of advisers have got investments with these insurance packages and they have to be opened up.”

Evolve Financial Planning director James Norton said: “We ring up these companies on a regular basis to find out charges and it is like banging your head against a brick wall. They cannot tell you even if they want to often because they do not know. Clients should know what they are paying for, particularly when a large number of these insurance funds are quasi-trackers.”

Spencer-Churchill Miller Private partner Alan Miller said ETFs, by contrast, offered transparency, liquidity and a clear fee and dealing structure so investors know what they are getting.

He said: “With ETFs, you have live pricing, you do not have to arbitrarily deal at a particular time and you do not have the same fund risk as you do in individual funds.”

Skerritt Consultants investment director Andy Merricks said part of the responsibility fell on clients to know what they are investing in. He said: “There is so much lethargy among those people that are in those funds. It is not so much down to the intermediaries who put them in there, it is the people who are in there are just not interested. That is where part of the education needs to comes in to make people aware of how much they are getting ripped off.”

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