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INDEPENDENT VIEW

Another week passes and another headline appears announcing that a group of fund managers are moving to pastures new, furthering the game of musical chairs that we have seen as an increasing trend since the turn of the year.

Coupled with mergers and mega-mergers that continue to take place, where does this leave the poor investor who has put aside their hard-earned savings into a long-term contract that suddenly in the short-term is then left with a problem and a difficult decision following the exodus?

The marketing steamroller is very quick to exploit the star performer and promote the best-performing funds in general but we do not see the same activity when a major change takes place and investors have been left in a potential freefall situation without a parachute.

At a time when greater transparency and openness is needed, it is disturbing, therefore, to see that there are rumblings among some of the major investment houses protesting about the charges levied by Standard & Poor&#39s Fund Research which has become an accepted standard of external rating, providing some benchmark for the overall quality of a particular fund in its selected category.

The final decision is obviously down to the commercial judgement of an organisation and whether they see any merit in incurring the costs for this external rating. I do not know the sums involved but I am convinced that, in terms of an overall marketing budget, the spend is unlikely to represent a major percentage.

Because of the fund manager changes in particular and with the regulator moving to a new disclosure regime where past performance will not be considered an appropriate measure of a fund&#39s merit, the issue of a credible rating mechanism is moving up the agenda.

Every IFA decides his or her own selection process before making recommendations to clients and, cutting out those that use the flavour of the month approach, fund selection is a time-consum-ing business.

At one level, there is the general marketing information, which is then added to roadshow presentation, contact with the local regional managers and individual discussion with fund managers. Additionally, with the increasing use of technology, more background information is fairly readily available to back up the established printed statistics from various sources.

What this does lead to is a fragmented approach which ultimately will do the job but is not particularly consistent.

As the old saying goes: United we stand, divided we fall. We have seen in recent times that, with Aifa, once there has been general backing for a trade association representing the bulk of the IFA market, it is a voice that is listened to and, therefore, one where the IFA&#39s voice can be heard.

The same recognition for a recognised ratings agency is important for fund managers to retain their credibility which is not being helped by the many changes currently taking place and the increasing poor publicity relating to charges and performance.

IFAs need to be able to offer competitive products with a consistency of good per-formance and, if investment groups want us to promote their products, then they are going to have to be able to demonstrate the reasons why we should be supporting them and independent assessment is a vital part of that approach.

Nicholas Conyers is director of Pearson Jones

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