Will the transparency Zeitgeist pervade the FCA?


The Financial Times is reporting that the Association of Member Nominated  Trustees are ready to exercise muscle to get to the bottom of what we are paying for charges.

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This is really good news ; but before we get too excited . let’s look at the hurdles that remain.


Trustees may feel they own their member’s money and have full ownership rights. They choose where money is invested and have the right to disinvest from funds where they don’t get proper answers.

But the structure of our funds means that few trustees can demand – unilaterally – for information. This is because most funds are “pooled” meaning that many groups of trustees (and many individuals) share ownership rights, meaning that trustees will need to work together.

And funds often invest in other funds, meaning that permissions are further blurred. The legal complexity works against transparency, the owners of pooled funds do not have automatic rights to information.


The association of member nominated trustees does not fully represent a board of trustees. Trustee boards also contain company nominated trustees and professional trustees.

While all trustees should be primarily focussed on the interests of members, the interests of the sponsor and even of the fund managers often compete. There will be times when fund managers have special relationships with employers and there will be times when professional trustees have professional relationships with fund managers.

These relationships should not cause conflicts of interests, but I fear they sometimes do. I speak from experience. Even where trustees have grave suspicions they are not receiving a fair deal from their managers, they may have reasons not to ask the critical questions.

An example recently was the refusal of the Parliamentary Trustees to grant Barry Gardner a transparent view of the ESG actions of the Trustee’s fund managers. Whatever the reasons of the Trustees not to release information, a conflict had arisen between the interest of members and those of the trustees.

More typical conflicts occur because of secret deals – known as NDAs (non disclosure agreements). These non-disclosure deals are pacts between fund managers and trustees to secure low management charges by denying access to third parties to investigate what those costs and charges actually are.

A further and more general inhibitor is what the fund managers call “relationship management”, at an innocent level, relationship management is about strengthening trust in a manager, but it can easily create a conflict for trustees in asking awkward questions to people they get on with. Taken to an extreme, some trustees may find themselves guilty of accepting hospitality from fund managers and quite unable to speak out against their hosts.

The costs of knowing cost

The cost of auditing a fund manager’s costs and charges can be substantial. Many fund managers have not the capability to fully understand whether their costs and charges are under control as they simply don’t know what good looks like.

Before a fund can be assessed for value for money, a value for money benchmark needs to be in place and benchmarking requires people to bring together data from a wide variety of sources so that the analysis is robust.

There is a danger that the cost of measuring costs balloons and that VFM assessment becomes just another gravy train for the consultancy industry.


This cannot be left to the market

Already , the fund industry has woken up to the potential threat transparency creates to margin. I note with interest that there is now a concept known as “tactical transparency”



Perhaps this is what certain fund managers are employing in inviting me to private chats in their plush offices.

The Transparency Zeitgeist is upon usI think it unlikely that even the Transparency TaskForce, with it’s increasing momentum, could defeat a funds industry that had mastered “tactical transparency”! Indeed, to pin the industry down and avoid being “leveraged by social media” , we need a rather bigger hammer.

We need the FCA

To date, no one organisation has become authoritative on VFM. We do not need a number of competing VFM tools, we need a single system as has been created in the Netherlands , under the auspices of a Regulator.

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I do not think that we will get an effective VFM benchmarking service without the intervention of a Regulator and I think the FCA are in a position to intervene in this case. The time it has taken to get this far (and this blog argues we are nowhere near there yet), shows that the market is not capable of sorting this out on its own.





About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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3 Responses to Will the transparency Zeitgeist pervade the FCA?

  1. George Kirrin says:

    I don’t share the FT’s apparent enthusiasm for the AMNT’s initiative.

    Knowing the cost of everything and the value of nothing is often used as a term to describe bean counters. I could now extend that to well-meaning but misguided MNTs?

    Transaction and other costs are but one component of expected investment returns. I would have more time for the AMNT and others if they spent similar amounts of effort around topics such as yield, growth, reinvestment recycling, and buy/avoid, hold or sell disciplines.

  2. Tony Filbin says:

    The more information the Trustees have the better their ability to fulfil their duties – “if you cant measure it you cant manage it” is an equally old term.It’s not a case of doing this at the expense of other equally important aspects but in raising governance capabilities overall.

  3. henry tapper says:

    Tony, I think if you and George were to meet, you would find you had more in common than it would appear!

    George, your comment has inspired the basis of Tony’s talk to the Transparency Task Force this morning.

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