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IPE special report May 2018

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Campaign groups hit out at UK charge disclosure proposal

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The founder of a transparency pressure group has criticised the Investment Association’s (IA) stated aim of getting a new cost disclosure code enshrined in the UK regulator’s lawbook.

Andy Agathangelou, founder of the Transparency Task Force (TTF), warned that such an outcome would mean the UK’s investment charges rules were “designed by a highly conflicted trade body whose primary responsibility is, and remains, the welfare of their members and not the actual investors themselves”.

The IA, the trade body for UK asset managers, on Monday published a framework for cost disclosure, including transaction charges, that it said would comply with multiple regulations and client types.

It asked the Financial Conduct Authority (FCA) to grant “regulatory recognition” for the code once it is finalised by adopting it into its Conduct of Business Sourcebook, the UK’s financial services rulebook.

Agathangelou was a member of the IA’s independent advisory committee that fed into the development of the proposed code, but admitted he was “not a fan” of how it had operated, and refused to endorse the code.

He also argued that the IA’s code “doesn’t consider” the interests of retail consumers.

He called on supporters of the TTF – a voluntary group of professionals campaigning for transparency across the investment industry – to help produce a strong official response to the IA’s consultation paper.

“Given that very real possibility of the IA’s draft code becoming the rulebook, I think we need to help ensure the code is as good as it can be from an investor’s perspective, while continuing to argue that it should be the FCA itself that leads regulatory activity in this space,” Agathangelou said.

He said the FCA should “look at the entire value chain, not just the asset management sector”.

“It seems to me we are heading for exactly the kind of ‘patchwork quilt of protocols’ that will result in weak, inconsistent, and virtually unenforceable regulation that has prevailed for decades; unless of course the FCA conclude that it should not be the trade body to the asset management sector that writes the rules,” Agathangelou concluded.

Gina Miller, who leads the True and Fair Campaign for transparent fund costs, also criticised the IA’s proposal, describing it in a post on Twitter as “pure jargon and complexity”.

“Transparency can blind if not focused or simple,” she said.

Chris Cummings, chief executive of the IA, said in his foreword to the cost disclosure consultation that “it cannot and should not be the intention of the industry to impose a framework on its clients”.

Other organisations have been more supportive of the IA’s proposal.

Graham Vidler, director of external affairs at the Pensions and Lifetime Savings Association (PLSA), UK pension funds’ trade body, said: “The PLSA has always recognised the importance of understanding transaction costs in order to ensure value for money on behalf of scheme members, and it’s good to see the IA taking steps to standardise disclosure. We will respond to the consultation, with a focus on ensuring that the code permits consistency and comparability.

“We urge our members and the pensions industry as a whole to respond to this important consultation.”

Vidler was also a member of the disclosure code’s advisory committee.

The FCA has said it would not be bound by industry proposals. Speaking at the PLSA conference in Edinburgh last month, Chris Woolard, the regulator’s director of strategy and competition, said it had all too often become “stuck” with “whatever comes out the other end of the pipeline” from industry-led solutions.

“I want to be absolutely crystal clear we are not going to be put in that position,” he said. “So if we find that there are industry solutions that don’t measure up then that’s philosophically where we’ve got to be prepared to go to.”

The IA’s consultation is open until 19 May, and can be accessed here.

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