Consumers do not expect to know the detail of how an investment fund is run and there is a limit to the disclosure fund managers should provide, according to the Investment Management Association.
Speaking during a panel debate at a conference hosted by the Open University Business School in London last week, IMA director of training and education Victoria Nye suggested there can be “too much” transparency in the industry.
She said: “Investment management is a professional job and you cannot expect to make people professionals overnight by explaining what is going on underneath the bonnet.
“You wouldn’t expect to know how your car runs, so why would you expect to know the detail underneath an investment fund?”
Nye added: “There is an element of trusting the product labelling. The rise of risk targeted funds and solutions-based funds is where people are inherently trusting the labelling, including the advisers who are recommending those types of products.
“There is a clear recognition that we shouldn’t have too much disclosure although it is there if people really want to look at it.”
She was responding to a question on whether transparency can make investments seem more complex and risky.
The investment management industry came under further pressure last week to reform cost structures following a damning report from the Financial Services Consumer Panel.
The panel is calling for the introduction of a single and comprehensive investment management charge which includes estimates of forward costs, including transaction charges. Its research found current cost measures are a “poor guide” to the total costs paid by consumers, conflicts of interest are poorly managed and competition is not working in the best interests of consumers.