So everything is crystal clear, the Retail Distribution Review (RDR) has been introduced, the Financial Conduct Authority (FCA) has banned rebates and transparency reigns in the financial industry; consumers are rejoicing - well not quite. From Key Investor Information Documents (KIIDs )to the more recent proclamation from the Investment Management Association (IMA) calling for clearer fund charges, it is evident that clarity across a sway of financial products and services is some way off and as perplexing as ever.
Given the generational shift from final salary to defined contribution pensions and the increasingly urgent need to get the nation saving to provide a half decent pension pot, let alone enough to enjoy retirement, it's in the interests of the financial services industry for punters to understand the value and cost of financial advice, or what a product actually is.
From the consumer's perspective trying to fathom the cost of a particular fund, what's actually disclosed or not, even before assessing the cost of advice and other ancillary charges is virtually impossible!
I fully support Daniel Godfrey, chief executive, IMA's call to a broad range of stakeholders to build a simple, accessible solution and develop a methodology that makes costs totally transparent to everyone.
However, as his recent article in This is Money explains, there are many hurdles to overcome. Daniel talks in good faith about players within the industry working together, but the issue that strikes me is whether the whole industry really wants to be transparent or would prefer to continue its obfuscation. Let's face it, there is a lot of self interest in allowing the current system to be maintained rather than demystifying the whole process.
I sincerely hope that I'm wrong and that the financial services industry follows the lead of certain players to ensure that disclosure improves and costs fall. But if the point of all this transparency and clarity, forced by the regulator, was to expose the profits being made and hence drive down costs, then I fear the end consumer will be sadly disappointed, as it appears that the cake is still the same size it's just sliced differently.
Clean share classes aren't available to all. Investors going direct are not, in all cases, receiving the lowest or even standard management fees on funds. An unintended consequence of the FCA's ban on rebates is that platforms are likely to demand lower management costs to gain a competitive advantage. Sounds good, but the funds that can afford to play will be those that have size and hence economies of scale. If smaller funds are then ignored this potentially reduces investors' investment universe significantly, discriminating against the smaller more nimble, and often better performing investment houses - not good for the consumer.
Without doubt the behaviour of the industry is changing but there seems to be more dragging and kicking than willing participants - and will the consumer really benefit? Financial advisers have a major role to play in providing high quality advice to clients and the RDR changes have undoubtedly improved professional standards. But helping them to explain the full cost of their advice and the financial products the customer invests in is essential, otherwise we will all be poorer. Let's face it, without planning and saving for the future we risk a life of all work and no retirement. Not a pleasant thought!