Time to end this charges rip-off

Pound coinsGuest blogger Gina Miller of the True and Fair campaign explains why more transparency is needed about the fees we pay for our investments.

Savers in the UK are being ripped off to the tune of £18.5 billion a year.
That's thanks to hidden investment and pension fund charges, coupled with portfolio turnover and transaction costs – but many are totally unaware of these hidden charges and what they are really paying. I believe it is time for a fundamental change.

Many people do not realise there are hidden fees when investing your hard-earned money in ISAs, pensions and other investments. Addressing this practice is crucial, especially when nearly half of the UK workforce is not saving enough for retirement and every effort has to be taken to encourage saving.

How can we make informed decisions?
Research we commissioned among consumers and independent financial advisers (IFAs) has shown that 78% of IFAs believe fund managers should disclose the full breakdown of all fees incurred when investing a client's money. 89% of consumers say they would like a full breakdown of all their investment fees too.

Unfortunately, unless action is taken, the odds are stacked against consumers being able to make informed and competitive investment decisions to maximise their investments.

Across the fund management industry, management and transaction fees cost UK savers around 79% more than investors pay in the US. The UK regulator, the Financial Services Authority (FSA), has been aware of dishonest charging practises since 2000 when its own research showed that approximately 50% of charges were being hidden from investors. Twelve years later and nothing has changed. In fact a few weeks ago one of their spokesmen said they would now be 'thinking about it"!

We recently saw a professional retiring couple who were convinced their previous fund manager was charging them 1.5% in total each year. But the manager had 'forgotten' to include the 2.5% initial fee, the underlying fund fees and the dealing costs. We were able to calculate, from numerous documents, that their fees were closer to 3.7% per annum over a five-year investment period.

Nearly 20% of their money would be gone in charges over five years. But would the investment manager be growing their investments enough to justify these fees, especially in a low return equity environment?

Improving transparency
Tackling this issue head-on is the True and Fair Campaign, launched earlier this year by SCM Private.

The campaign aims to not only raise awareness among consumers of this important issue, but also to get the investment industry to think about investors, significantly increasing transparency and remembering the human face of running investors' money.

The campaign calls on the Government, Parliament and regulators to establish a new Gold Standard requiring the UK investment management industry to provide every prospective customer with:
  • A guarantee of 100% transparency in respect of where their money is invested
  • A guarantee of 100% transparency as to the full underlying costs of investments
  • A code and labelling scheme, which ensures consumers are provided with product information in a consistent, unified and understandable format
What you can do
Firstly you can show your support for the True and Fair Campaign on the website. The louder the voice, the easier it will be to bring about change!

Secondly, take up the True and Fair Challenge on the campaign website. Download the True and Fair Label from the website and when talking to your financial adviser or fund manager about your investments, place it under their nose and challenge them to tell you the truth about the fees you are really paying.

Do not let them carry on the deception - all the information required does exist, so do not allow them to fob you off! It is your money, you have the right to know how much it costs and how much or how little you get back.

As the campaign gains more and more support, the industry and Government will have no choice but to listen, force change and put the consumer first.

Gina Miller is co-founder of SCM Private and The True and Fair Campaign

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