SCM Private: 'Self-interested IMA' aiding next mis-selling scandal
From Regulation Feb 14 2012 BY: Esther Armstrong
, Senior Reporter
, Portfolio Adviser
SCM Private's co-founder, Alan Miller
SCM Private has lambasted the Investment Management Association (IMA), claiming it is leading the investment industry in the wrong direction - reducing transparency, rather than improving it.
The investment management firm also said UK regulators were lagging the US Securities and Exchange Commission (SEC), which it said takes transparency very seriously, insisting on full portfolio disclosure on a quarterly basis, available publically via the internet.
In the latest episode of the hidden fees debate, SCM Private released a report it said explains how British investors have, over many years, "been comprehensively misled by the investment management industry".
It pointed to the multiplicity of hidden fees, a lack of product transparency, and the convoluted language used by the industry as the main factors misleading consumers and said investment managers had been given no regulatory or behavioural incentive to improve on these fronts.
True and fair campaign
The report sets out in full a code and labelling scheme first announced by SCM Private two weeks ago with the launch of its "True and Fair Campaign".
Within the report, a specially commissioned ICM Research poll showed 84% of respondents felt fund managers should be required to disclose the full breakdown of all fees, while 70% wanted to be able to find out exactly where their money is being invested.
Gina and Alan Miller, the founding partners of SCM Private and authors of the report, said they do not believe the financial crisis could be viewed as the root of mistrust in the City as it merely fuelled "concerns which have long existed about questionable practices in the industry".
The fact the UK was found to have the fourth highest total charges out of 19 countries in 2007 and UK funds were also found to charge 79% more than US funds when weighted by assets in 2009 has exacerbated consumer mistrust SCM Private said.
Absolute Return time-bomb
On the topic of mis-selling, SCM Private said the IMA plays a self-interested role and contributed to the Arch Cru crisis by choosing to classify a fund investing in unquoted African and Greek investments as 'Cautious Balanced'.
It added the £21bn Absolute Return Sector has the potential to turn into the next mis-selling scandal and is not likely to be addressed quickly enough, with the current sector review scheduled to take another six months to complete.
"It could be argued that giving important powers of fund labelling and classification to a self-interested trade body is not serving either the regulators' key responsibilities or investors' key interests," SCM Private concluded.
What is your view on the transparency, or lack of it, in the UK investment industry? Do you think SCM Private's campaign is going along the right lines? Let us know below.
For the full report, click here.