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Lee Robertson: Fund groups need a lesson from advisers on behaviour

The FCA scrutiny of the asset manager continues apace, with attention now turned to closet tracker funds. Following regulatory lessons and actions already seen in Scandinavia, it has ordered unnamed asset managers to pay out £34m in compensation to investors for overcharged fees. At least one group is facing enforcement action over “very misleading” marketing material.

In all, it identified 84 potential closet tracker funds, of which 64 were required to change their marketing literature to more accurately reflect how money was invested.

The European Securities and Markets Authority has said around 15 per cent of funds could be closet trackers, and has encouraged regulators to investigate matters more closely.

Many of us in the advice sector, particularly those selecting active funds for inclusion in clients’ portfolios, have long spoken out about this problem. It is absolutely right investors get what they pay for.

While 84 out of the many hundreds of active  funds available may seem a relatively minor number, it will not feel that way to investors in those funds and I would wager it will not sound that way once the legal and claims industry gets into hyper-drive, with ads and cold calls no doubt already on the start line.

It is a shame the asset management firms concerned did not listen a little more closely to the mood music around this issue from advisers, the financial press and consumer groups.

No part of the industry has escaped the consumerist approach of the modern regulator, and this has largely been for the better.

I am not saying where we are is perfect but if I look at the advice sector, greater disclosure and more professionalism based upon rigorous examinations and CPD has led to a real upswing in standards.

A good proportion of forward thinking firms were already a long way down this path but much of the advice sector had to be dragged across the line.

So it seems the same with asset management. There are lots of very good firms with good investment outcomes based upon clear marketing materials seeking to deliver above average performance in exchange for a more expensive fee than an index or tracker fund.

Sadly, and akin to the regulatory action that became necessary in the advice sector, asset management is now being required to have a section of rather more self-interested players be dragged across the good behaviour line.

More transparency allied to more accurate marketing behaviour, and actually charging the investor for what they are really receiving in management terms, can only lead to better investor outcomes.

I hope behind closed doors, the asset management sector and trade body organisations are having robust discussions to help the laggards understand that poor behaviour reflects very badly upon the whole sector, no matter how unfair.

As advisers, we all learned that the hard way.

Lee Robertson is chief executive of Investment Quorum


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