Asset managers’ failure to provide clear transaction costs incurred in pension funds leaves savers “deeply depressed”, Frank Field says.
The Work and Pensions Committee (WPC) chairman, who resigned the Labour whip last week, said opacity in the fund management industry was akin to the alleged police cover-up in the 1989 Hillsborough disaster – which saw 96 football fans killed and convictions being sought against police 27 years later.
He made the comments today (5 September) during an inquiry into whether the pensions industry provides sufficient transparency of costs and charges, as well as strategy and performance data to pension scheme members, noting “the [Hillsborough] cover-up stopped” once all the evidence had been put forward.
“Why is it so difficult to get the industry to agree the use of English which is accurate?” he added. “Anyone watching who has a pension must be deeply depressed about their investments.”
Giving evidence at the inquiry, Financial Conduct Authority’s (FCA) Institutional Disclosure Working Group former chairman Dr Chris Sier explained there were several reasons for the lack of transparency within the industry.
Namely, these were a combination of a “‘we’ve never done it before’ attitude”, a lack of demand for cost data and poor delivery of such data, compounded by the overall complexity of the “operationally inefficient” industry.
The IDWG has recently proposed five cost disclosure templates to be adopted by asset managers, which will be published by the FCA this autumn.
Sier said the templates would “address the root causes” of fund management opacity, but warned: “There will always be a pool of asset managers, but an increasingly shrinking pool, who will either refuse or decline to give data.”
He added the industry needs a data collection standard, and suggested a public register of asset managers who do not make their charges transparent, granting a “perspective” of the impact of undisclosed costs.
“At its core, the pensions industry is in an extremely complex and messy state, and that needs to be resolved, and it can only be resolved, by getting data on it.”
Also giving evidence, Transparency Task Force founding chairman Andy Agathangelou went a step further, arguing standards must be mandated to overcome “festering sores on the face of financial services”.
He told the committee “There’s a huge mindset, attitudinal, and regulatory change that needs to happen. Let’s understand the commercial dynamics of the industry, and recognise there’s a true tension between the profit motives of the industry – as laudable as they are – and the simple desire to protect the interest of the consumer from adverse costs.”
The probe was launched after a previous WPC inquiry into the pension freedoms found problems with information provided to pension scheme members, most notably with British Steel workers who it said had been “shamelessly bamboozled” into signing up to unsuitable products with high investment risks.