The Times are running this story as a result of a tip-off by professional charge-busters and founding members of the awkward squad SCM Direct. If you don’t know what SCM Direct is, that’s because you aren’t one of their clients, SCM Direct is the wealth management business of Alan Miller (of New Star fame) and Gina Miller (famous for just about everything but especially for “Remaining”).
Here’s the Thunderer with the evidence presented it by the Millers
The rules were first set out by the EU in April 2014, so the industry has had years to prepare, said Miller.
“It’s time for the chief executive of the FCA, Andrew Bailey, to demonstrate that he is willing to be the industry enforcer rather than the industry lapdog.”
In one case, a (Times) Money reader with lasting power of attorney over his 98-year-old father’s affairs asked the wealth manager Canaccord Genuity for the charges on his parent’s £700,000 portfolio.
In an email, an investment director at the firm said its management fee was 1.25% and a flat £30 commission per transaction would also apply. The reader asked SCM Direct to check. It emerged that the 1.25% did not include VAT, underlying fund charges or transaction costs. The overall charge was closer to 2.75%, meaning an additional £10,500 in charges were not initially highlighted.
Canaccord agreed the full charge was nearer 2.75%, but said it was asked specifically for only its own management fee and commission charges and intended to disclose the full cost to the client “ahead of an expected face-to-face meeting”.
David Esfandi, chief executive of Canaccord, said: “If there are any suggestions we have been less than transparent with our fees, we would strongly refute that.”
Research conducted by SCM Direct in May shows the Investec Click & Invest website presented its charges as ranging from 0.35% to 0.65%, depending on sums invested, and underlying fund charges averaging 0.6% (0.75% today). However, this did not include transaction costs, which add a further 30% to the fund cost.
Investec said: “We should have clearly shown the transaction fee within the average underlying fund charges. We have amended our website and apologise if this has caused confusion.”
SCM Direct also highlighted potential breaches by Coutts, Tilney Bestinvest and Wealthsimple.
Coutts said: “We already include details of the platform fees and the main fund charge at several points in the customer journey. In response to Mifid II, we have added the funds’ transaction costs to our Fee Tariff Document, which is readily available to clients. Next month, we are launching an integrated solution, including a personalised digital calculator, to further improve transparency.”
Tilney Bestinvest said wealth managers relied on fund management groups to provide accurate information. “We are currently in advanced dialogue with data vendors to enable us to secure this data and satisfy ourselves that their coverage is comprehensive.”
Toby Triebel, Wealthsimple’s chief executive Europe, said: “Both our management fee — 0.7% — and underlying portfolio charge are visible on our website, in addition to being highlighted through our help centre and magazine.”
Even I , a seasoned watcher of corporate bull, was startled to read such utter hogwash from seemingly reputable organisations.
If you can’t t understand your charges, that is not “true and fair”. Being “in an advanced state” of complying with something you’ve known was coming for 14 years and has been law for nearly a year now is NOT GOOD ENOUGH.
The Miller’s point is a good one. If the FCA are not going to enforce its rules, it shouldn’t make them and we should live in the Wild West of fund management as practiced in numerous jurisdictions round the world (read Angie Brooks for details).
It’s not good enough to stand idly by and allow this bad practice to continue and I’m 100% behind Alan and Gina’s “True and Fair” campaign. Read about it here.
The proof of the (investment) pudding is in the spending.
You might think this article is leaning a bit too much on the Millers, after all they’ve made a fortune from investment management. I don’t doubt that they’ll continue to make a fortune by running a “clean shop”. The point that the Miller’s are making by running a successful business on “true and fair” lines is that you don’t have to be uncommercial to be honest.
I am aiming to be as successful as the Millers by setting up AgeWage to tell people “truly and fairly” how their lifetime savings products have actually done relative to the money they have paid to the financial services industry. Value for Money is something we think is inherent in the simple equation “money-in, money out”. There can be no excuses in the final reckoning; when it comes to saving the proof of the pudding is in the spending.
We now have the tools
Working out “ongoing charges figures” (OCFs) is good and it’s what should come out of the legal requirements to disclose from MIFID II and PRIIPS. But OCFs and other percentage based measures only play to the people who understand percentages and the way compound interest works.
More important to people when they are judging things are measures that tell them what value they are getting for your money. Which is why I want to turn performance and charges into a single score that relates – not to some abstract notion – but to your understanding of what’s gone on.
Since the Data Protect Act 2018 and (to a lesser extent GDPR), we have all been able to get to the data about ourselves necessary to understand the value and the money we’ve got from our savings. AgeWage is simply a way for people to have this information brought together to tell them how their savings have done and how they are likely to do in the future.
In both intent and practice , AgeWage is born out of True and Fair and this blog acknowledges Alan and Gina Miller, Chris Sier, Andy Agethangelou and the other members of the awkward squad, who are gradually wresting back control from those who intermediate between us and our investments.