Glossing Over – the Standard Life Aberdeen Way.

Date Published: 18 July 2018

Category: Investment

The Financial Reporting Council (FRC) allows companies to report the Key Performance Indicator (KPI) of investment performance in a way that befits the Mad Hatter. How on earth can Mr. Skeoch, the joint CEO of Standard Life Aberdeen justify this? How can he also choose to sit on the FRC Board who just laughs in the face of hard-working investors?  

Mad Hatter tea party

We at SCM Direct have been complaining about the way various public companies have been reporting their investment performance in their Report & Accounts for over a year.  Why are we investing so much time, energy and resources doing this?  Because we believe reporting investment performance before fees and charges misleads consumers and shareholders.  Not to mention allowing senior management bonuses to be partly based on this ridiculous measure of fund performance. It’s a veritable Alice in Wonderland world of investing where things are never quite what they seem.

  • It is reasonable to expect publicly listed companies to provide the KPI (Key Performance Indicator) of investment performance in a way that makes sense – i.e. based on the actual returns received by clients rather than an illusory investment performance calculated before fees and charges.
  • When the FRC told SCM it had notified any companies that had not made it clear whether they had calculated their investment performance before or after fees, they could not be bothered to write to the largest UK quoted fund management company.
  • You might think the FRC would discuss the issues raised at Board level, particularly when the Joint Standard Life Aberdeen CEO, Mr. Keith Skeoch, sits on their Board.
  • You might think the FRC would conduct more than a superficial word search when it claims it is reviewing a set of accounts.

In view of the above, isn’t it time for the FRC to be replaced and its Board resign?

Our view is that the public should not trust any fund management company who presents their investment performance before the fees that its clients must pay as we believe this is totally illusory.

Standard Life Aberdeen are not the only firm to follow this Mad Hatter style of reporting investment performance.  A big difference is that the joint CEO of Standard Life Aberdeen sits on the FRC Board, which pretends it encourages high standards of corporate reporting.

As it happens, KPMG, who are receiving quite a lot of criticism for their professional standards recently, audit Standard Life Aberdeen.  The accounts state:

“Data prepared in accordance with our reporting methodology and the KPI is within KPMG’s limited assurance scope. Both KPMG’s limited assurance report and our reporting methodology can be found at

As KPMG says itself, “limited assurance“, never have their words been more apt!

You will see from their latest accounts that Standard Life Aberdeen think (rightly) that investment performance is important.  It is a Key Performance Indicator (KPI) that features on Page 2 of its accounts:

Standard Life Aberdeen accounts

However, nowhere on this page does it reveal that the 63% of its AUM that have outperformed its benchmark has been calculated before allowing for the various fees and charges which clients were levied. This, one could argue, is totally illusory.  No client would have received this performance as clients tend to pay costs and charges, thereby reducing their returns.

The investment performance gets a mention (without saying the basis by which it was calculated) on pages 19, 40 and 45 as well as Page 2:

Standard Life Aberdeen performance

Standard Life Aberdeen AUM

Standard Life Aberdeen Performance over 1, 3 and 5 Years

Unless you had looked in the Glossary on page 302 of the accounts (and it took the FRC two weeks to find this), you would not know that all these calculations were based on investment performance as if no fees had been charged.  Is this transparent or Aberdeen “gloss“ary?

If Standard Life/Aberdeen are so happy to ignore fees and charges, maybe their clients should do the same and ask for any fees and charges to be repaid to them.  This would then enable Standard Life Aberdeen to show investment performance in their report and accounts that matches the performance received by clients.

Standard Life Aberdeen Glossary

You will note that the table on Page 2 above has a R beside the KPI, this shows that it is being used as part of the Executive remuneration structure – I wonder why?  Could it possibly be that by calculating the figure before rather than after fees, a higher percentage of funds could be said to have outperformed, thereby justifying larger bonuses?  Surely not?

Standard Life Aberdeen KPI

Standard Life Aberdeen Directors remuneration

I would suggest Mr. Skeoch resign from the FRC, which has tirelessly proven itself to be incompetent.

I would also suggest he also ensured that future accounts show their investment performance after not before costs.  If he still wants to persist with the Aberdeen/Standard Life “gloss” maybe it would be a good idea to show the basis of calculation for investment performance before page 302 of his accounts?

Background and timetable of SCM Direct Complaint to the FRC

We have been complaining to the FRC about the scandalously poor way investment performance is shown within the company accounts for more than a year now.  The FRC wrote to us on 22 November 2017, claiming it had approached various fund managers and identified three in which it was not clarified whether or not they calculated their performance before or after fees.  It stated that these firms had provided undertakings to the FRC to improve future disclosures:

FRC disclosure

We therefore pointed out to the FRC that a Board member of the FRC ( ) in his position as Co-Chief Executive of Standard Life Aberdeen plc, had approved its latest Annual Report & Accounts on the 23rd February 2018 which appeared to have not made clear whether its investment performance was calculated before or after fees and therefore appear to contradict the statements made by the FRC to SCM.

It took the FRC two weeks to respond in any detail, saying:

“We have, however, looked at the 2017 report and accounts of Standard Life Aberdeen to which you also drew our attention.  Although there is no indication in the extracts of the report you provided whether performance is calculated on a gross or net of fees basis, we did find confirmation in the Glossary (page 302) that the measure is applied gross of fees”

After intense pressure from ourselves to respond to our original request as to whether or not the FRC had contacted this company, as would seemingly be expected were it to have honored its original undertaking, the FRC admitted on the 6th July 2018 it had not written to “Standard Life or Aberdeen Asset Management (prior to their merger as Standard Life Aberdeen) as part of its review into how fund managers reported investment performance in their annual reports. 

The FRC did not write to Aberdeen Asset Management in respect of the 2016 annual report because by that time it had delisted in anticipation of its merger with Standard Life. 

The FRC did not write to Standard Life in respect of the 2016 annual report because on our review we did not find any reference to investment performance as a KPI Having looked at the matter further, this appears to have been caused by the use of inaccurate/mistyped search terms when reviewing the relevant reports.  This was not of itself a ‘red flag’ because some of the companies whose reports we considered did not disclose investment performance in their strategic reports.  We therefore did not consider the matter further prior to your recent correspondence.  I can confirm that the FRC Board (including Mr. Skeoch) were not aware of the CRR review, and that the issue arose due to an administrative error.

Had we noted that the annual report (i) did refer to investment performance but (ii) did not disclose the basis of calculation, we would have written to Standard Life in the same or similar terms as we wrote to other fund managers who did not disclose the basis of calculation in respect of investment performance


So, there you have it – an admission by the FRC that when they review company accounts they simply search for a term rather than read the accounts.   Sheer laziness and incompetence are the watchwords of the FRC.

Time for the FRC and its Board to do the right thing. Resign. The FRC is probably the most ineffective, incompetent, and intellectually dishonest regulator in the UK.

We could not agree more with Sharon Bowles, MEP who sums it up[1] as:

“The FRC is fatally flawed in the way it was set up and has been operating, and distance needs to be put between that culture and the future regulator.

“This is most likely to be effective if the FRC is wound up and a comprehensive, fully accountable companies regulator set up that is not based on trade association relationships and which follows fully all the principles of public life.




Please Note

The value of investments can go down in value as well as up, so you could get back less than you invest. Exchange rates may cause the value of overseas investments and income from them to rise and fall. It is therefore important that you understand the past performance is not a guide to future returns. SCM Direct does not give personal advice.

SCM Direct is a trading name of SCM Private LLP which is authorised and regulated by the Financial Conduct Authority to conduct investment business.  Company registered in England and Wales, no. OC342778.

Leave a comment


Sign up to our monthly factsheets