The Investment Association’s terms of reference

Professional Pensions reports that the Investment Association (IA) have appointed senior pension figures to advise the it on a new disclosure code for investment costs.

Helen Morrisey, the paper’s editor is optimistic

I’m sure the process will be challenging but I have no doubt this panel, which also includes representatives from the Local Government Association and the Transparency Task Force, are up to the job of helping to create something that enables schemes to have a truly informed view about what they are paying to who. I wish them luck!

I am not optimistic.

I would have sooner made Tony Blair editor of the Chilcott Report than put the IA in charge of a disclosure code for investment costs.

The Investment Association represent the interests of the fund management industry and (since its merger with the investment wing of the ABI) the insurers. It’s job is to represent its members interests and those interests are to generate profits for shareholders, bonuses for senior managers and to do so out of the funds of unit holders and policy holders.

There could be no clearer conflict of interest.

In order to absolve themselves from these conflicts , the IA are setting up an independent committee. Independence is critical for transparency but this committee is neither independent or transparent.

Firstly it needs an independent chair

Mark Fawcett , CIO of NEST is to be chair of this group, he is not the right person for the job.

I like Mark Fawcett – he is a clever man and I’ve endorsed him many times (see his Linked in profile). However he is not (IMO) – the person for this job.

His high profile role lends the IA advisory board a quasi-governmental authority. It has no authority, the IA is a lobbying association for the funds industry.

NEST is itself in need of greater transparency and I have been very critical of some decisions that it has taken – especially in its appointment of State Street as its funds administrator.

Mark cannot be both advisor on and consumer of an advisory code

Secondly it will be operating under a code of secrecy.

So far we have a press release

“Independent Panel to Advise IA on next-generation disclosure for investment costs”

There’s a list of the great and the good to sit on the committee but nothing of any substance.

When Con Keating asked TTF supremo Andy Agethangelou for the committee’s terms of reference, Andy had to admit that he was bound to silence!

Can there be anything more absurd than a confidentiality agreement governing the leader of the Transparency Task Force? Andy appears to have signed his own gagging order against my advice.

Keep your friends close and your enemies closer.

So long as that confidentiality agreement is in place, Andy cannot represent the TTF in this, he can only represent himself, as he has no mandate from the TTF to speak for us.

Thirdly, the Investment Association are not to be trusted .

It is only a year since they booted out their own CEO- Daniel Godfrey– for demanding that the IA adopt a fully transparent code.  Daniel Godfrey is now in the FCA and hopefully will get more luck overseeing the production of the current market review into the funds industry!

The last time the IA put together a voluntary code (in 2012), standards of disclosure actually fell. It is now harder than ever for us to find out how much we are actually paying for fund management. I have little doubt, that with a fair wind, the IA would kick transparency not into touch, but over the fence and into the river.

This leopard has not changed its spots. It is a ruthless organisation that has a decades long history of obfuscation, filibustering and general bad behaviour. It is the enemy of good funds governance and should be excluded from any discussion over codes of conduct.

Too big for the private sector

Taken together, the appointment of Mark Fawcett as Chair, the secrecy surrounding the dealings of the committee and the appalling track record of the IA, make this Committee toxic. It does not have my support even though Andy Agethangelou, in all else -does.

The FCA are reported as wanting the private sector to sort this problem out for itself, but there is no way it can. Even with the TTF and financial consumer groups working together, we would be throwing peanuts at an elephant. The funds and insurance industry laugh at our puny efforts and patronise us with this committee to string the process out a few more years.

The only way that we will see true disclosure is by Government requiring it. It should form the basis of the new charge cap due to arrive in April 2017 (for workplace pensions), it should override MIFID and Prips (both of which look to be post-BREXIT irrelevances). Full disclosure should be the consequence of the call for evidence from the FCA in April 2015 and the outcome of the current market review of fund managers and investment consultants, currently drawing to a conclusion.

It took the Dutch Central Bank to make things happen in the Netherlands and it will take the FCA/Treasury/tPR/DWP to make things happen in the UK.

If any good comes out of this farcical initiative from the IA, it is to show how weak the private sector is in putting its house in order. We need Big Government to intervene, we need proper Regulation with a big R and we need it now.

The Investment Association’s terms of reference