Investment Association chief resigns over transparency push
Daniel Godfrey, chief executive of investment firm trade body the Investment Association (IA), has resigned after two major fund houses – M&G and Schroders – signalled their intent to leave the organisation.
According to press reports, Godfrey was pressured to step down by the trade body's board after the two companies announced their intention to pull out next year. The two companies represent 11 per cent of UK retail investors' funds.
Schroders and M&G were two of a number of firms that in August refused to sign a 10-point Statement of Principles produced by the IA. This put forward principles of behaviour for firms to adhere to, including calls for more transparency on the costs investors pay, as well as putting clients' needs first. Three other non-signatories, Invesco, Fidelity and Aberdeen, were also rumoured to be threatening to leave.
According to the Financial Times, the firms were threatening to leave because of the aggressive stance taken by the IA under Godfrey on transparency of performance fees and transaction costs.
“It is an astonishing indictment of the UK fund management industry that even half-way measures aimed at bringing in genuine transparency, which would vastly improve consumer protection by investors knowing exactly what they are paying and where they are invested, are seemingly met with complete refusal by the big guns in this shoddy industry,” said activist Gina Miller, founder of the True and Fair Campaign for better fee transparency.
“It beggars belief that a non-legally binding statement of principles which simply contain practices that every other reputable non-investment firm carries out without hesitation, should be considered contentious. In the past we have argued that the UK investment industry acts like a cartel, and these moves add weight to our argument.”
The IA and the firms involved have all been extremely cagey and not made any clarifying comment to the press.
In a statement, IA chair Helena Morrissey said: “During his time Daniel has driven a number of important initiatives. His commitment and passion for our industry is widely admired by all those who have worked with him. We owe him a great debt of gratitude and wish him the very best for the future.”
Until the IA finds a permanent replacement for Godfrey, Guy Sears, director of risk, compliance and legal for the IA, will take over as interim chief executive.
Rebecca O'Keeffe, head of investment at our sister website Interactive Investor, says: “Clients have an expectation and a right to be clear on the value they're receiving and the costs they are paying.
“Greater transparency and clarity of costs have revolutionised the execution-only broker space and now offer a clear, unambiguous choice for investors. Fund management groups have made significant steps in the right direction and it is vital that the industry continues to focus on achieving fair value for its clients.”
Usually charged as a percentage of returns for performance above a specified benchmark, such as an index. The fee can range from 10% to 20% of total investment returns on a low starting benchmark such as Libor and investors could find themselves paying extra fees for merely average performance. Note that these funds do not compensate investors when the manager underperforms the benchmark.
Describes the relationship between a client and a stockbroker or independent financial adviser whereby the broker or adviser acts solely on the client’s instructions and doesn’t offer any advice on which shares to invest in or financial products to buy and simply “executes” the wishes of the client, regardless if they are judged to be sound or wrong. Other types of broking service offered are advisory (whereby the client/investor makes the final decisions, but the broker offers advice) and discretionary (whereby the broker manages the portfolio entirely and makes all the decisions on behalf of the client).