19 April 2010

Managing Your Investments

Many investors make use of what are variously called "platforms", "fund supermarkets", or "wraps". These are tools which provide you (or perhaps your adviser) with the means to manage your investments online. By way of example, one of the most popular is "Cofunds".

There are various advantages in using a platform, and they include the means to see all your investments in one place (or at least investments of a particular type, like unit trust funds / OEICs) - even if that is just an annual statement. Costs are generally lower than going direct to individual fund managers, too.

Now the FSA is, to my mind, muddying the water by proposing "unbundling" the charges so that they are clearer to investors and their advisers. It's not yet clear what that will mean in practice, but in principle it seems to be about making it clear how much of the annual / initial charges are down to the platform itself, how much is the charge from the fund managers, and how much is the advice charge (although for Prime Time Financial clients that is already a separate charge since we charge a fee for our advice and don't take commission).

That sounds good at first sight, but when you stop to think about it the last thing investors really need is further complication. It would be like Sainsburys having to show a number of prices on a carton of milk - what part of the cost is down to the farmer, the packaging, the transport, and the retailing. Would that be helpful? Or what about low cost airline flights which already "unbundle" the charges - you still have to pay the unbundled "booking fee", and the charge to get your luggage on board, etc., and most travellers would say it is confusing and unhelpful.

Greater transparency is a good principle, but perhaps there is a lack of realism and business sense among the regulators, since they are not the ones to have to explain it to the average investor, who may only think about their investments a couple of times a year, and who, above all, need simplicity.

The danger is that investors will be too confused to bother, and that will be to everyone's detriment. Let's hope it turns out better than I fear. But whatever happens I'm here to do my best to explain it!!

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