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From Sweden with love

Julian Marr Marr’s Markets

There was a time – a different century, perhaps, but still barely 10 years ago – when the majority of new recruits to the personal finance pages of national newspapers came from the trade titles. Indeed, this very magazine was the undisputed leader of the production line, as it used to trumpet – rather immodestly, I always thought – every time it ran an ad to replace the latest departure to the Times, Telegraph or Mail on Sunday.

Then the production line ceased – as did the low-rent bragging – and for various reasons. The rise of the internet changing the way journalists structure their careers for one thing, national newspapers’ propensity for paring back permanent staff at the slightest excuse for another. And then, of course, there is Stockholm syndrome.

Around the end of the 1990s, certain newspapers developed the view that trade journalists were – no, don’t laugh – a little too pro Her Majesty’s financial services industry for their liking. That, if you will bear with my metaphor, during their prolonged and necessary exposure to providers of funds, mortgages, insurance or whatever, they had as it were been turned.

The default position of most newspapers these days – and, interestingly, most rule-makers – is that all product providers are baby-eating pirates whose sole ambition in life is to rip off consumers, none of whom should be expected to take any responsibility for their part in the purchase of the aforementioned funds, mortgages, insurance or whatever.

I remain unconvinced but, just because I suspect that some fund managers, for example, might at least be partly driven by a desire to make their investors money, does that mean I suffer from Stockholm syndrome?

Believe it or not, I ask myself this question quite often although never so much as when planning to write about the great fund charges debate of 2009. That runs pretty much along the lines of the great fund charges debate of, well, you pick a year but it has a twist in that one of the people now accusing fund managers of baby-eating piracy may well have swashed a buckle or two in a previous existence.

Alan Miller, once of New Star Asset Management, now of Spencer-Churchill Miller (SCM) Private, argues that fund managers impose hidden charges, telling the Guardian, for example, how investors could be facing annual hidden charges of as much as £5.8bn in addition to the £4.3bn in annual charges calculated via the total expense ratio. For the record, SCM Private describes itself as a “prog-ressive wealth management organisation” and is quite keen on passive investment.

In the opposite corner, we find the Investment Management Association, whose recent research into fund management costs has, it says, exploded the myth that investors are subject to big hidden charges. For the record, the IMA describes itself as a “trade body for the UK’s £3tn asset management industry” and is quite keen on, well, asset management.

So no major surprises, then, as to where either party is coming from but can there be common ground? Well, I think we can all accept fund managers buy and sell shares – it rather comes with the territory as, of course, do stamp duty and dealing costs. Call these hidden costs and they do sound sinister but surely they are only truly sinister if they are ramped up by fund managers through unnecessary trading.

Yet why would managers do this? Even the most gone-native hack would hardly argue that fund groups are known for their charitable nature so why would they choose to give money to brokers and, worse, HM Revenue & Customs if it were not absolutely necessary? What’s more, if such costs are a drag on performance, why would they want to shoot themselves in the foot?

Costs may or may not be transparent but performance is and – whether the FSA likes it or not – it will always be something on which fund managers are judged. Intuit-ively, therefore, much of this churning argument feels wrong and, while that may be down to Stockholm syndrome on my part, I would point out it is only a small fraction of captives who, once free, remain loyal to their former captors. Most, for whatever reason, are less forgiving.

Julian Marr is editorial director of


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