The asset management industry must improve how it communicates with consumers and policy makers as it faces increasing scrutiny from regulators in Brussels and around the world, according to the CEO of Investment Management Association (IMA), Daniel Godfrey, speaking at the Association of the Luxembourg Fund Industry's London conference on May 14.
He pointed out that managers face another three to five years of “very intense” pressure and work after the implementation of the Alternative Investment Fund Managers (AIFM) directive.
“I think it’s vital for the industry that we work together to consistently improve the way we’re able to communicate and to explain to consumers about what we do.”
Costs, in particular, should be explained more clearly, said Godfrey.
Pointing to a Financial Conduct Authority report released on May 13 that found examples of UK funds having failed to explain costs clearly, he argued that lack of transparency was an issue not only in the UK but across Europe and globally.
“We are a very fortunate and privileged industry, we enjoy very good rewards for being in the industry and until we can articulate what we do, why we do it and what the costs are, we’re going to find ourselves under the continuous pressure from politicians and policy makers that makes it difficult for us to get on with doing that very important job.”
Godfrey mentioned that the IMA had received ratification for a new accounting standard that would give a comprehensive measure of costs an investor incurred.
He urged asset managers to quote an ongoing charges figure rather than an annual management charges figure, saying the latter was misleading.
“There is no need any more to talk about annual management charges and leaving people see a number that may be considerably lower than the actual ongoing charges that they should expect.”
The IMA’s new accounting standard will require funds to produce a total cost figure in pounds and pence per unit which will include operational charges and transaction costs. This will likely be required for all UK funds from the end of the year.
Godfrey concluded by saying that the asset management industry was increasingly important to the UK, Luxembourg and the rest of the world because of the continuous increases in longevity.
“People need to provide for their future and the only way they are going to be able to secure confidence around their standards of living as they get older is by investing in asset management and, particularly, investing in funds.”