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IA too 'fundamentally conflicted' to be trusted on fees

IA too 'fundamentally conflicted' to be trusted on fees

The Investment Association is too ‘fundamentally conflicted’ to be trusted to produce independent guidelines on fund fee disclosure, a member of the trade body’s advisory board has warned.

In a formal response to the IA’s draft cost disclosure code, which was issued for a public consultation in March, the founder and chair of campaign group the Transparency Task Force Andy Agathangelou said responsibility for the code should be handed to the Financial Conduct Authority.

Agathangelou, who is also governor of the Pensions Policy Institute, said: ‘The IA is a trade body and trade bodies have a primary duty of care for the commercial interests of their members.

‘The extent to which the IA is conflicted with what is best for the consumer has already been seen by their unwillingness to wholeheartedly embrace the idea of putting the investors’ interests first.’

The IA has been roiled by internal conflict over the direction of the body in recent years.

Both Schroders and M&G threatened to walk out of the organisation in 2015, after they were signally absent from a statement signing members up to a 10 point code of conduct intended to prioritise clients' interests.

Head of the IA Daniel Godfrey was ejected from the organisation shortly thereafter after failing to build consensus behind what some fund groups described as a ‘narrow and aggressive’ reform agenda.

Executives from Schroders and fellow fund giant Henderson have since taken up senior positions in the IA.

The body launched a push back against public pressure on charges last year, saying the idea of hidden fees which consumer rights groups have claimed are snuck into funds were the ‘Loch Ness Monster’ of finance.

‘The industry should be judged on its actual delivery, not on perceptions of delivery,’ said IA director of public policy Jonathan Lipkin at the time.

‘If you look at the actual performance delivered to fund investors, this is the proof point and we do not see evidence of high transaction costs, either explicit or implicit.’

Agathangelou added that such statements ‘undermined consumer confidence in the credibility of the Investment Association’.

‘This is exactly the kind of publicity that results in the financial services sector routinely being at the bottom of consumer trust ratings.

'Furthermore, the reputational damage this kind of behaviour causes must contribute to the UK’s appallingly low savings ratio – just 3.8%, which is the worst it has been since 1963. This is a huge problem for our economy and society as a whole today.’

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