"Ripping off customers is nothing new for asset managers... "

Check the FT article here 30 June 2017

The FCA’s report is a travesty that is bereft of remedies, writes Gina Miller

In 2002, the Sandler Report on the UK retail investment market found “the reporting of product charges is typically neither clear nor consistent”. More than 15 years on and the UK regulator is still allowing the industry to rip off customers by charging excessive fees, which has a huge detrimental impact on the returns investors are getting on their hard-earned money.

Granting people the basic consumer right of knowing how much they are paying appears to be too difficult for an industry that works with complex data, facts and figures. In terms of price competition, there simply cannot be any genuine price competition if the consumer does not know the price.

This is why, as the most recent FCA report reveals, the asset management industry has profit margins of 36 per cent. This is more than double the operating margin of the FTSE pharmaceutical and biotechnology sector (14 per cent), which is based on intellectual capital and extending lives.

When the FCA’s interim report came out in November 2016, it was hard hitting and exposed the numerous dubious practices SCM Direct has been highlighting for years through our True and Fair campaign: closet index tracking, hidden fees, consultants’ conflicts of interest and false reporting of performance.....

check out full report here and get angry if you have any pension or investment plans. You are being ripped off. When you exclude their bonuses the profit of fund managers is not 36% but 48%. 

Stop ripping us off: Financial Conduct Authority report on pension fund managers

Today Government regulator, the Financial Conduct Authority (FCA)  issued a final report on the fund managers who manage our pensions and investment savings. 

It is pretty damning. 

My interpretation is that fund managers are making excess profits (a staggering 35% profit in sample companies examined). Incredibly these firms do not compete on price.

There is no real evidence that active managers outperform passive (or index) or that past performance is any guide to future performance. Except if you are a rubbish fund manager now you are likely to remain so in the future. 

I like this quote about so called closet trackers "The FCA estimates that there are around £109bn in ‘active' funds that closely mirror the market which are significantly more expensive than passive funds".

Paying more for expensive managers who promise the earth does not result in better returns on your money. 

The FCA diplomatically say there are "concerns" about pension fund consultants. 

Of course - none of these concerns apply to the fund managers, advisors and consultants on the pension funds I am involved with :)

By pure coincidence, I attended this afternoon, a really challenging but enjoyable "brain storming" with some pension officials on the future of Defined Benefits schemes, FCA report, governance, Law Commission report, cost charges and scheme consolidations. 

Check out Professional Pensions

"Shadow pensions minister Alex Cunningham says the FCA's final report on the asset management market is a turning point and urges the government to take action".

Saving for a pension and buying a fridge shouldn't be so different. You look at the performance information, compare the costs and decide which product you wish to buy.

Unfortunately, this isn't quite the case; no-one knows how much their pension costs, as the charges applied to it are opaque and complex, leaving room for high prices to be paid for a poorly performing pension. 

This could all be about to change today however, as the Financial Conduct Authority (FCA) publishes its final review of the asset management market. The recommendations in the report will impact upon the second-largest industry in the world, one which looks after nearly £7trn of our savings. 

This report could not come soon enough. For too long, serious questions have been asked about the value for money that investors - a group which includes all of those saving for a pension - are getting in return for stashing their savings into a pension pot.

As the FCA has recognised, pension charges are both extraordinarily high and desperately opaque. This market is alone in offering consumers such little information about the product that they are buying, either with regard to performance or in terms of cost. This has to change; in no other area of our lives would we buy something without knowing its price.

The FCA's recommendations very much chime with Labour's approach to transparency, hammered home during the debates on the Pensions Schemes Bill but dismissed by the government. It's not enough for someone to think all they're paying is the half or 1% on their statements.

A Labour government will implement the recommendations in full with particular attention paid to; strengthening the duty on fund managers to act in the best interests of investors; ensuring the disclosure of a single, all-in fee to investors; a consistent and standardised disclosure of costs and charges to institutional investors and the removal of barriers to pension scheme consolidation and pooling to drive efficiency and better returns.

In order to guarantee an open and competitive market, we will ensure that trustees are given the power to collect and report on all costs, that they are able to understand the full performance of their investments, and that can access and then report honest information to their savers.

Fund managers should be required to reveal all the costs associated with their activity, as we would expect in any consumer market. This will give trustees and savers the information necessary to compare and contrast cost and performance between managers, improving competition in the market.  

For those rolling their eyes at the idea of better regulation for this sector to protect savers, it is worth remembering that open and transparent cost regime will protect sponsoring employers too, who will be able to deliver the best possible pensions to their employees at less cost.

But will the government act? The last one failed to, and with a new secretary of state and pensions minister we shall have to wait and see if the promises made by their predecessors are fulfilled. For Labour, transparency in pensions saving is the foundation from which a new pension system can be constructed - one that works for the many savers, not just the few who are supposed to serve them.

Alex Cunningham is the shadow pensions minister and Labour MP for Stockton North

(and my frustrated speech to UNISON Conference last week)

"Pension Costs and Charges" - UNISON National Delegate Conference 2017

I was tasked to speak on this motion 26 on behalf of the NEC at Conference last week but it did not receive sufficient prioritisation by branches and regions to be debated. 

Which is a shame since if we don't bring down the costs and charges of not only the Local Government Pension Scheme but all funded schemes and stop the rip offs then the future is bleak.

Next year. 

Anyway here is my speech. Hat tip Mr Meech.


"John Gary, NEC and Chair of the SGLC LGPS Forum

UNISON have been campaigning for the right to know what it is we are paying for the management of our money and finally the veil of hidden costs are being removed.

We made a significant breakthrough when we persuaded the Local Government Pension Scheme Advisory Board’s for England, Wales and Scotland to adopt a ‘Code of Cost Transparency’ and move toward the collection and analysis of all costs incurred by the 100 pension funds.

This is conference an amazing step forward for workers and our savings. There is only 1 other country in the world with that transparency of cost and that’s the Netherlands.

Last week we had the country’s largest fund manager and manager of the largest amount of LGPS assets. £30bn. Declare it is signing our code of cost transparency, Legal and General.

This means every worker that has Legal and General managing their pension fund can now legitimately ask for the same cost transparency.

In Britain people get a statement showing what they've invested during the year, the value of their fund a year ago and its value today. There is no attempt to strip out what has been gained in investment returns and what is then subtracted in charges, let alone what these various charges are for.

Without this information people can't evaluate whether their pension trustees of manager is doing their job.

It is not just individuals who need this information to select a decent pension fund. Thousands of smaller employers will soon have to provide pensions for their workers.

Most have little idea how to evaluate these complex charging structures, so could end up selecting inappropriate and expensive schemes, potentially leading to mis-selling accusations at a later state.

Pension charges are too high and too complex. If your car is serviced in a garage you get an itemised bill explaining what each charge is for, which part was replaced and what the labour charges are, all in pounds and pence. No one would quote the fee as a percentage of the value of your car, which would be meaningless. But this is what happens with pensions.

So £billions of our money leaks out of our funds and we are the losers, they are used to pay for the extravagant life styles of the city traders and fund managers.

This money is used to fund the Tory party – our money cutting our own throats. Conference everyone needs to pay attention to the trial of money that starts from our payroll.

The UK Government must be pushed by us to finally curb the worst mis-selling scandal in the history of British finance, greater than endowment mortgages, PPI, energy profiteering or even sub-prime mortgages.

I refer to the legalised theft of billions of pounds from citizens' pension funds through excessive charges, a scandal that has been going on for at least 20 years and has ensured a miserable retirement for millions of older people.

Please support the motion

Hat tip cartoon

Wake up & smell the Coffee: Do not expect the State to give you Justice at Work

Tomorrow UNISON is taking the Government to court in a judicial review of the decision to charge as much as £1,200 to take your employer to an employment tribunal. If you lose then expect to pay £1,600 to go for any appeal.

This is on top of any solicitor or barrister costs you might have to pay.

As this chart from the Employment Tribunal service indicates claims have not surprisingly dropped like a stone with the imposition of charges. While these figures are provisional it would seem to be clear that only the rich will be able to get justice at work in the future.

Except for union members. I think all the major unions have agreed to pay these charges upfront and supply free legal advice and representation if (and this is important) they think a member has a winnable case.

Remember that you cannot just join a union when you have a problem at work and expect representation.  It is like trying to buy household insurance after you have had a fire. All unions have waiting periods.

So join a union now! If you work in public service then join UNISON of course here 24/7. Or check out the TUC Union finder website.

Best of all is that the more people in your workplace who are in a union, the better you will be treated by your employer and the less likely you will ever need to go to an employment tribunal!

So - as they say over the pond - wake up and smell the coffee. The State will not give you justice at work, the only one who can, is your union.

Hat tip Captain Swing and Daniel Barnett employment law e-news alert.

How we pay for the City (& expensive Red Wine)

I recommend that if you have a funded Pension that you listen to this excellent Radio 4 programme "How You Pay for the City".  

Former fund manager David Pitt- Watson pointed out that excessive charges in the UK compared to  Holland means that the average comparable dutch pension will be 50% more than you would get in the UK.

While the incomparable Mr Colin Meech, UNISON National Officer for Capital Stewardship, thinks that the Local Government Pension Scheme is just being ripped off. He recounted how a colleague who became a fiduciary trustee on a large scheme was shocked to find that the trustee board spent more time being wined (at £100 per bottle!) and dined by fund managers than they spent supervising the scheme. I have heard the same story from that colleague.

It is not just excessive fees by fund managers but also "churn" (excessive buying and selling of stock); stock lending (they lend out your share certificates for a fee), "Custody Banks" (if something is too good to be true...) and "transitional management" (there is a completely shocking story how the Royal Mail Pension fund was cheated and how a judge was told that an untruth was not a lie)

By coincidence we heard similar arguments at the AMNT Summer Conference from Michael Johnson that I posted upon yesterday.