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M&G chief wants fund firms to close clarity gap

M&G chief executive Gary Shaughnessy has accused fund companies of dumbing down their message to investors in a bid to sell as many products as possible.

Shaughnessy hit out at firms for oversimplifying investments to make them easier to sell, which creates confusion and disappointment when returns fail to reach what investors had hoped for.

He believes that investors have shown a desire to understand products and should be given detailed product descriptions and be kept aware of changes to products’ risk ratings.

Shaughnessy claims that investors are being left with an educational gap in investments and he is calling for asset managers to lead the way in delivering simple, quality information.

Fund sales boomed while the stockmarket was high and investors put increasing demands on fund companies to produce better returns as groups fought for consumer business.

But since the market dived, investors have become more wary while regulators and the Government have demanded increased clarity.

The FSA has set up a financial capability panel to try to narrow the gap between information being handed out by financial services firms and consumer understanding. It has also developed simplified prospectuses.

However, with sales of funds booming through fund supermarkets, the Investment Management Association supports Shaughnessy’s view that consumers need to take some responsibility.

Shaughnessy says: “There was a lot of dumbing down of what consumers needed to know. That happened bec-ause consumers wanted to buy products and fund management groups were desperate to sell them. Investment firms have to get away from that. Investors want that to happen and so do we.”
IMA head of communications Helen Stevenson says: “It is the responsibility of the fund management companies to make sure that consumers are given information they can understand. There is still a gap but work is being done to narrow it.”

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