Kamis, 31 Mei 2012

Cheaper funds would spark a surge of stock market buying, claims charges campaign group

Cheaper funds would spark a surge of stock market buying, claims charges campaign group

By Andrew Oxlade

PUBLISHED: 10:48 EST, 31 May 2012 | UPDATED: 11:43 EST, 31 May 2012

Nine million people would save £100 more a month if the cost of stock market saving was 'more transparent and fair', new research suggests.

The results also suggested that 36 per cent of savers invest directly by buying shares rather than via funds, which charge for selecting stocks, and that only 23 per cent believed charges on stock market funds were ‘very fair’ or ‘fair’. 

The study was commissioned by SCM Private, a new investment firm that is campaigning for clarity on fund charges.

Investing costs: Returns would be far larger if charges were lower

Investing costs: Returns would be far larger if charges were lower

Gina Miller, co-founder, said: 'Our research is alarming.  At a time when people need to save more, millions clearly do not trust the system and are opting to either invest directly or simply do nothing.  This has huge implications for individuals themselves, but also the State in that more people will be reliant on benefits when they retire.

Mrs Miller formed the company with husband Alan Miller, a former fund manager at the now-defunct New Star Asset Management.

SCM Private launched its True and Fair Campaign in January, calling for a new code of conduct and fee-labelling system.

Campaigner: Gina Miller is calling for greater clarity

Campaigner: Gina Miller is calling for greater clarity

Their criticisms include the fact that the vast majority of fund managers still advertise their funds with the 'annual management charge', which is nearly always 1.5 per cent, rather than the 'total expense ratio', which includes more, but not all, of the costs pushed on to investors.

Some funds have a 'TER' of more than 2.5 per cent a year yet still advertise a yearly charge of 1.5 per cent.

The industry has not taken the criticisms lying down.

Fund sellers have lobbied the government, urging it to stop campaigning against high charges.

Hargreaves has told the Department for Work and Pensions (DWP) in a consultation submission that a ‘constant drip’ of negative messages about how high pension scheme charges had convinced people pensions were ‘a rip-off’.

The Investment Management Association has said the campaign mounted against it on fees has been built up around 'a series of myths that have been lapped up by the media'.

Earlier this month, it published a paper which it was claimed showed that fund managers earn their money by delivering, on average, better returns than much cheaper index tracking funds. But Miller said at the time the report was 'biased and flawed'.

She added today: 'The investment management industry has a duty to ensure it delivers the highest level of transparency and fairness, yet it continues to flaunt this duty and it is therefore up to consumers and consumer bodies to place pressure on the regulator and government to force them to behave ethically.'

The Investment Management Association said today that it 'fully supports disclosing all costs in a way which is transparent, accessible and intelligible to consumers'.

A spokeswoman added: 'There are a number of ways of doing this and we are in the latter stages of engaging with our members about how better to disclose fund costs. We do not believe, nor have we ever said, that full fee transparency would put off investors. The issue is about making disclosure meaningful and accurate.'

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