Adding Up Should Be Child’s Play for Fund Managers.

Date Published: 26 May 2017

Category: Investment

According to the Cambridge dictionary, the word ‘aggregate’ means ‘something formed by adding together several amounts or things’.  Not complicated for fund managers you might have thought, but it would seem to have totally outwitted their UK trade body, the Investment Association (IA).

They are seeking to avoid important legislation that is due to come into force in January 2018 that will be a gamechanger for consumer transparency, hence protection.  Known as MiFID II[1] this regulation will require the industry to show the total amount of ALL charges faced by their clients (i.e. the aggregate of all costs and charges) and to show the impact of these costs and charges on their returns.

Here is the legal requirement that the UK investment management self-interested and conflicted association wants its members to fragrantly breach:

“The information about all costs and charges, including costs and charges in connection with the investment service and the financial instrument, which are not caused by the occurrence of underlying market risk, shall be aggregated to allow the client to understand the overall cost as well as the cumulative effect on return of the investment, and where the client so requests, an itemised breakdown shall be provided.”

It is hardly surprising that this anti-consumer, anti-transparency IA trade-body’s former CEO admitted[2] that the investment industry had been misleading investors for over 20 years and was then reportedly fired[3] for trying to get his members to put clients’ interests ahead of their own.

No doubt, many of their largest members are worried about the effect of having to tell their clients how much their total charges actually amounted to, not just as a percentage (aggregated) but in actual pounds (aggregated).


What could the IA do? 

Well, it would seem that someone at the IA, let’s call him Baldrick, came up with a cunning plan – Baldrick sought to completely ignore the forthcoming black and white law on charges and replace this with a new ‘transparency’ code designed to:

  1. a) not show the total
  2. b) not show the cumulative effect of costs on their returns and most importantly
  3. c) not be in a format that a typical client might understand.

Once this was achieved Baldrick suggested that they could then pressure the UK regulator (the FCA) into adopting this completely worthless code into their rulebook.  The IA applauded Baldrick on his excellent but very cunning plan and set out on their new template for showing charges to investors.

Here is the suggested layout that Baldrick and colleagues managed to produce for any investor in a pooled fund i.e. unit trusts etc.[4], to understand their fees and charges:


What could be simpler?

Within this bewildering template produced by the Investment Association[5], you will not find the total cost of investing anywhere.  They have interpreted this new transparency regulation in a format where too much information is dazzling, and they are still clinging to the belief that not all costs are really costs and better either to:

  1. a) not to show clients the real total or
  2. b) show parts of the overall costs separately so clients don’t add them to the other costs in order to get the real number.

You might say this is erring on the side of dishonesty.  I couldn’t possibly comment.

You also won’t find some of the other key elements of the future legislation within their new code e.g. knowing the cumulative effect of costs on their returns with a full explanation.

Will the UK regulator be fooled by this last desperate roll of the dice by Baldrick, sorry the IA.  Only time will tell but here is one more point I would like to mention.

Many of the largest UK fund management companies pay for the Investment Association highly trained spinners[6].  The IA received just under £11m in revenue in 2015, of which £774k was paid to their CEO.  Every time the IA produces another piece of worthless research,  sooner or later it tends to be widely discredited, further damaging the already even tarnished reputation of the UK investment industry which ironically the IA goes to absurd lengths to protect (at any cost).

Last year, the IA managed to plumb new depths, by producing a report entitled “Hidden Fund Fees: The Loch Ness Monster of Investments?”[7]. This report was intellectually dishonest, highly misleading and completely bereft of substantive analysis.  Its findings were based on an arbitrary 2 year and 10-month period and incorporated non-existent fund performance data and misleading benchmark comparisons.  The resultant deluge of criticism of this report was even more than usual.

Today, the IA is seeking to reach new depths – hoping to deprive investors of the basic right of knowing exactly what they are paying.  A situation that was identified by the industry regulator 17 years ago.

This is contemptible.

Here are the IA Board members. I would suggest their clients should be asking them directly why the IA seeks to continue hiding fees.  Rather than the IA attempting to hoodwink consumers, the Board should force the IA to mandate that its members act in a morally, ethically and legally correct manner regarding fees and charges – that means that from January 2018 they must force their members to show all the charges and add all of them up.



Peter Harrison is Chairman of the IA. He is Group Chief Executive at Schroders


Andrew Formica is Deputy Chairman of the Investment Association. He is the chief executive of Henderson Group plc


 Irshaad is responsible for the business development and client servicing for all AllianzGI’s institutional clients in Europe


Jasper Berens is head of the UK Funds Business at J.P. Morgan Asset Management


Maxime Carmignac is Managing Director and Member of the Board of Directors of Carmignac Gestion S.A.


Michael Cohen is an equity portfolio manager at Capital Group


Chris is CEO of the IA


Paul Feeney is the Chief Executive of Old Mutual Wealth


Alex is a member of the Global Client Group Executive Committee, Leadership Committee and European Executive Committee and also serves as a Director on the BGF and BSF Fund Boards. 


Pete is the Managing Director of Fidelity’s UK Business


Deputy Chief Executive, Aberdeen Asset Management


Kim is the Chief Operating Officer and an Executive Director of Investec Asset Management


Euan Munro is the Chief Executive Officer of Aviva Investors


Joanna Munro is HSBC Global Asset Management’s Global Head of Fiduciary Governance


Mike O’Shea is the Chief Executive of Premier Asset Management


Gervais is the Managing Director of Miton Group plc


Mark Zinkula is the Chief Executive Officer of Legal & General Investment Management (LGIM)


Leave a comment


Sign up to our monthly factsheets