By Jeff Prestridge
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Online ‘fund supermarkets’ have revolutionised the way hundreds of thousands of us buy and manage our investments. They make for an easy way to research and compare funds, to switch money between investments and bring multiple holdings under one virtual roof.
For many smart investors, the days of receiving an annual paper statement from separate Isa companies seem laughably quaint.
Even where a customer does not directly use these fund platforms to manage their money themselves, a financial adviser will often do so on their behalf. But for all the benefits, these platforms have a darker side â€" it is extremely difficult for investors to know how much they are paying.
Revolution: For many smart investors, the days of receiving an annual paper statement from separate Isa companies seem laughably quaint
Many supermarkets charge fund managers fees to appear on their listings, typically 0.25 to 0.3 per cent of money invested each year. Those who won’t pay don’t feature on the supermarkets’ virtual shelves. The supermarkets can also earn additional commission on top of these charges.
All these costs are ultimately paid for by you.
The Financial Services Authority wants a better system. Last week it proposed an overhaul of the way platforms are run from the end of next year. This will ban payments by product providers â€" insurers, pension companies and fund managers â€" to platform companies.
The expectation is that the annual management charges on funds will fall sharply, perhaps from 1.5 per cent to 0.75 per cent.
But investors would then pay explicit fees, such as an annual charge or a monthly subscription, to use the supermarket.
The FSA thinks this will make it easier for consumers to decide whether they are getting good value and to shop around. There will be clearer incentives for firms to compete on price and service and it should stop supermarkets promoting certain funds. Overall, the regulator hopes that costs will fall.
The changes should also encourage the supermarkets to stock a wider range of investment products, potentially including investment trusts or increasingly popular retail bonds.
Taken together with the forthcoming Retail Distribution Review, which aims to give consumers absolute clarity on what they are paying for financial advice, tomorrow’s visitor to a fund supermarket or platform should know exactly how much they will be charged to administer and handle their investments. Given the unpredictable and volatile nature of the markets themselves, this one bit of certainty is a welcome step forward.
If the forthcoming vote on directors’ remuneration at Nationwide Building Society was based on comments by customers in emails to Financial Mail and on our sister website thisismoney. co.uk, there is only one way it would go. The remuneration report for the financial year to April 4 would be thrown out.
Since reporting seven days ago on the £2,251,000 package enjoyed by chief executive Graham Beale, and increases of between 9.3 per cent and 17.8 per cent received by the executive team, Nationwide members (primarily savers) and employees have been quick to express their anger.
‘It is pretty clear Nationwide is a mutual in name only,’ said one ex-employee of Derbyshire, a society absorbed by Nationwide in the wake of the 2008 financial crisis.
‘It is being run for the benefit of the senior management and is a complete betrayal of the far-sighted men who founded the building society industry more than 235 years ago.’
A saver from Stockport, Cheshire, said he was astonished at the levels of remuneration for the executive directors and implored Nationwide savers to make their views known at the AGM, scheduled for July 19 in Manchester. Another said the society was no longer run for the benefit of members but for the gain of directors.
Of course, only those customers who do not agree with the pay levels tend to contact campaigning newspapers such as ourselves, but it would be surprising if the 14-1 vote in favour of directors’ remuneration last year was repeated in just over two weeks.
In the meantime, members who want to register their disquiet should ignore the quick-vote option that empowers £300,000-a-year chairman Geoffrey Howe to vote on their behalf (he is hardly likely to vote against the directors’ remuneration report).
Instead, either fill in the voting form sent by post, explicitly voting against the resolution on directors’ remuneration, or do the same online.
Financial Mail, complete with tin hat, will be attending the AGM. We look forward to seeing some of you there.
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Fee's should reflect the skill and performance of the fund manager. No gain should be met with no fee, gains should be charged according to the size of gain made over a 5 year period as that is the term that financial advisers ask their customers to do when investing. Intermediaries such as banks b/s retain their commission or fee irrespective of the performance and only even then generally offer a limited spread of funds, just consider what our biggest b/s offers, hardly a vast range, given that there are thousands of funds on the market (they offer 20 or so). Times they are a changin.
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The problem is the assumption that investment fund managers will all lower their charges in response to this measure. The idea is a fund may charge 1.50% = 0.75% for the fund manager, 0.25% for the platform (such as HL) and 0.50% advice commission. At the moment the platforms pay you back some or all of the 0.50% and keep the platform payment as they do offer a service - the website, dealing, statements, running your ISA etc. What happens when the new rules come in? You don't get your 0.50% back, you have to pay 0.25% as a separate fee to the platform. This will only equal itself out if the fund manager cuts its annual charge to 0.75%. What if it doesn't or only cuts it to 1%? You lose out. I hope TiM will keep a close eye on fund managers to make sure they fully cut their fees and shame those that don't.
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