By Daniel Godfrey - Chief Executive, Investment Management Association
When I posted my last blog suggesting a new way of explaining costs and performance to our clients in simple, once-and-done, pounds and pence figures, I wanted to get feedback.
I have not been disappointed!
I wanted to stimulate other ideas and identify any potential problems. I wanted to be able to judge how controversial or impractical these proposals were so that we could decide how best to take them forwards.
In the event, the response has been overwhelmingly positive.
I have received some practical questions related to how we might deal with the way some managers protect funds from the costs associated with issuing or redeeming units and my team has been able to come up with practical solutions.
And I have received some valuable ideas as to how these proposals could be developed further, for example from Ian Gorham at Hargreaves Lansdown. I am grateful for the constructive feedback and comments I have received from such a large number of stakeholders - who all seem unified by a commitment to improve things for the benefit of the end investor.
In my experience, people are generally much quicker to complain than to support, so the fact that there has been an absence of push back and good deal of broadly based support from Members as well as external stakeholders is a good sign!
The two most common questions I get are "how long is this going to take?" and "how can you make sure you bring the whole industry with you?"
The answer to both questions lies in how we want to proceed.
The answer to the first is "as quickly as possible" and there's no reason we shouldn't have an agreed methodology this year. We would ask Members to adopt it as quickly as their next fund accounting periods come to an end.
This summer we will consult on the next iteration of our Statement of Recommended Practice (SORP) for Reports & Accounts of UK funds. Compliance with SORPs is expected as part of the UK accounting framework. Any departures must be explained and justified.
In preparing the SORP for public consultation we intend to explore with our partners and the Financial Reporting Council the possibility of including a single statement detailing the performance, the charges and the transaction costs for a unit held throughout the year.
This would enable our proposed once-and-done, pounds and pence, cost per unit number to be easily calculated.
If the consultation found that this proposal was workable in practice, adoption in the SORP would ensure that the methodology was consistently and universally applied.
It is vital that the investment management industry steps up to show in its actions that it will live up to its responsibilities to clients.
What investment managers do is too important, both for people and the economy to allow complacency to set in. A simple way of explaining costs and performance is one step in the right direction and paves the way for the next and then the next and then the next.
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