Searching for the Loch Ness Monster


nessie 1

Out hunting for hidden charges?

The Investment Association has concluded that hidden charges within funds are like the Loch Ness Monster, much talked about but never seen.

Presumably those of us consumers seeking to find the financial Nessie are like the cranks who sit upon the shoreline scanning the calm waters for the photograph that will make us!


A consumerist (with silly hat)

The research comes from Fitz Partners, a firm I haven’t come accross before who seem to make a living from providing fund managers with the numbers they want to see.

FITZ Partners main focus is to support the European funds industry participants in their cost management efforts and fiduciary responsibilities.

I have two issues.

Firstly the publication of fund statistics to the public (what this report does) deserves an independent source. Fitz Partners is not independent of the fund managers, as it’s website proclaims

FITZ Partners aim to assist asset managers with a regular delivery of consistent and detailed fund expense calculations and fee benchmarks, allowing fund operators and their boards to conduct detailed accurate reviews of funds operating costs.

Despite claims to be independent, Fitz Partners business model appears entirely dependent on the fund managers from whom we want proper data.

Secondly, the timing of this report is at the start of the process, the IA are currently embarking on.  In it’s press release , the IA states

Our forthcoming Disclosure Code will standardise fee disclosure including implicit cost estimates across all investment products

But the Investment Association are bound to pass this Disclosure Code past its Advisory Board (the one that meets in secret) . This board is supposed to be providing independent insight about the Code. In a volte face , the IA claim that it will publish the terms of reference of the Advisory Board but they haven’t yet got that far.

So before we have even got to setting up the TOR for the Advisory Board to provide oversite on the Disclosure Code, the IA have decided that these hidden charges are as mythical as the Loch Ness Monster. They have done so using a fund researcher whose revenues are sourced from the managers being researched and the Code will hear evidence about hidden charges – in secret.

The timing of this press release suggests a “fait accompli”. The Disclosure Code will also demonstrate that there are no hidden charges. No doubt the Advisory Board will meet in secret and validate this.

Nessie 2

More consumers searching for their money  Nessie

A legend on their own website

I admire the IA for its sense of humour. It just loves to take the piss out of the general public. Its offices in 23 Camomile Street must echo to the rafters with the laughter of merry fund managers pulling wool over the eyes of all and sundry!

“If you look at the actual performance delivered to fund investors, this is the proof point and we do not see evidence of high transaction costs, either explicit or implicit.” -Jonathan Lipkin (IA)

Well I’ve been working with funds for 32 years and I see no evidence whatsoever that consumer outcomes that investors get anything like Value For Money. I cite research from Thomas Phillipon, Norma Cohen, Novarca, Ros Altmann, David Pitt-Watson and Alan and Gina Miller which empirically demonstrates that what the punter gets is not what the punter was promised.

There is a serious point to their work, they are explaining to the people who save (forget the term investors) where their money goes. They are not in the pay of the Fund Managers or the Investment Association and publish in the public good.

This morning I will be having a pleasant cup of coffee with the man who dared to call time on all this backslapping nonsense. He now works for the FCA and is due to publish a properly independent report on the fund management industry and the various intermediaries that prop it up.

I suspect that having been sacked as CEP of the IA for suggesting they might be wrong about charges, he may look for a higher level of proof than is available from Fitz Partner’s research.

The Investment Association’s credibility outside its own offices and  website is rather lower than this arrogant , bumptious press release suggests.

NEssie 3

We’re poor deluded fools!

Fortunately, there are still papers who provide balanced journalism rather than printing the press release as the story. Well done the Daily Mail for cobbling this together.

Well done George Kirrin for reminding me of this Adam Smith observation (see comment below).

“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

About henry tapper

Founder of the Pension PlayPen,, partner of Stella, father of Olly . I am the Pension Plowman
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4 Responses to Searching for the Loch Ness Monster

  1. George Kirrin says:

    The IA reminds me of the BBA at the height of the last banking crisis ….

    …. and also Adam Smith:

    “People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.”

  2. Con Keating says:


    I will be writing up a critique of the IA paper – If you are seeing Daniel today draw his attention to the fact that they sue different benchmarks for active and passive – and just about all of thgeir quant findings flow from that. See below – taken from an email with Prof Pensions:

    There are no end of things wrong with it by the way, from using the SEC PTR calculation algorithm when even Brussels decided that was bullshit and developed another, to having different benchamarks for active and passive funds – returns cut from the document –

    Fund Benchmark

    UK All Companies – Active 16.00 13.61 UK All Companies – Tracker 15.78 17.27

    They also use the SEC method for PTR – which is the lower of purchases or sales – and so useless that the boyos in Brussels decided it was not fit for purpose and designed their own ( which of course was not a lot better.

    I will write up a critique – I take it you would like that.


  3. Mark Meldon says:

    Henry, perhaps another way of dealing with this issue is to emphasise the investment funds where great value-for-money CAN be had! Look at Vanguard FTSE All Share Index Trust with a OCF of 0.08%, Wisdom Tree UK Equity Income at 0.29% or the innumerable low-cost closed-end funds. Surely, if these funds attract the cash then the expensive stuff will surely die!


  4. Pingback: Give the funds industry an inch and they’ll charge you for 20cm. | AgeWage: Making your money work as hard as you do

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