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The IMA’s Daniel Godfrey: The corrosive issue of ‘hidden costs’


Everyone I know reported that they had a wonderful break over Christmas. Even though the issues we face for the next year have not gone away, it is great to have the opportunity to take a step back and look at them with renewed strength and a fresh perspective.

When you pull all the threads together, the picture that emerges is the important and valuable role that asset management at its best can play in people’s lives and in economic growth.

One thread is the breakdown of trust between society and the financial services industry. Notwithstanding the lack of blame that asset managers deserve for the breakdown of the financial system, and despite the great strengths and positive attributes of the industry, we need to stop talking about trust as if it were some kind of objective. Long-term reputation only changes when people see what you do and draw their own conclusions. Trust is not an objective – it is a consequence.

The most meaningful actions we can undertake as an industry are those that make the greatest positive difference to our clients.

The 2014 agenda for the industry is already both exciting and challenging. And there will be more to come.

The notion that fund managers hide costs is one of the most corrosive issues we face. We are working on proposals for a simple, comprehensive statement of return and costs to be included in reports and accounts, which would incorporate all the costs incurred by a fund over the course of a year and provide full accountability to investors in a simple, pounds and pence figure.

We held a consultation that closed last year and have been working our way through the responses to make sure we take on board all the sensible suggestions. We hope to be able to provide a feedback statement and start getting on with the next stages over the coming months.

At the same time, we are part of the pension reform debate. Charge and cost disclosure is an important part of the challenge here but so too is the broader process of DC scheme governance and oversight.

This will also be the year when we see the launch of the Investor Forum that will bring about more coordinated advocacy for long-term thinking in asset management. Given that the objectives of most of our clients crystallise in decades, it makes sense to build a stronger partnership between asset owners, asset managers and companies to give greater focus on long-term corporate strategy for sustainable wealth creation.

The Investor Forum will also bring together the widest possible range of investors into Engagement Action Groups when companies appear to be going off the rails and conventional engagement is failing. With the widest membership, it will also have the strongest voice.

The Investor Forum is an example of the industry working together to improve the long-term returns from companies in order to improve long-term outcomes for investors and contribute to GDP growth.

Finally, in 2014, we will be working with our members and all our stakeholders to develop a statement of principles and guidance that sets out how we make sure we can always be aligned to the needs of investors and fulfill our responsibilities to those who give us their money to manage.

Of course, we will have to fight for the time to focus on these initiatives in a year when we face the usual flood of new regulation as well the implementation of new elements of existing regulation like the RDR.

In addition, 2014 is a critical year for politics; we’ll have European Parliamentary elections, the Scottish Independence Referendum and manifesto planning by the UK political parties ahead of the 2015 general election.

There is a lot to be excited about, but I am already looking forward to next Christmas.

Daniel Godfrey is chief executive of the Investment Management Association



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