17
Oct
2019

Fund managers must earn customers' trust

City AM - October 2019

Today, three-quarters of UK households trust the investment management industry with their savings. Investment funds put those savings to work, helping people save for life's big events, whether that is getting on the first steps on the property ladder or planning for retirement. That is why when the industry finds itself in the headlines, we need to take a long hard look at the issues and learn the lessons.
 
For an investment fund run by a high profile manager to be suspended and closed is a very rare occurrence in an industry responsible for managing £7.7trn on behalf of millions of savers and investors. But it is one which clearly demands serious attention. A regulatory investigation into the circumstances surrounding LF Woodford Equity Income is underway and it will be important the results demonstrate that savers can be reassured that their hard-earned savings are in good hands. 
 
With millions of people across the country using the services of investment managers, our industry has delivered successfully for savers over many years, even during the worst market conditions. It is an industry that has helped millions of people live more comfortable lives, not just here in the UK but around the world too. Our customers benefit from a wide variety of funds designed to suit their needs, generating the long-term returns they are seeking. As an industry, we are world-leading in terms of the choice we offer savers and the robust regulations that our firms adhere to.    
 
Every industry should however be focused on improving the service it offers its customers.  And that is why, even when the events surrounding the closure of this fund where on-going, we were working on ways to bring more confidence to our investors.  A series of significant measures are coming into force which should help to reassure our customers and demonstrate the value delivered by funds.
 
Savers need to know where their money is being invested and that it is being overseen in a way that gives them confidence.  That is why the industry is implementing assessments on whether their funds offer 'value for money', and these will  be made available to investors each year - clearly demonstrating what is happening to the money we manage for them.  To ensure the strictness of the process, new independent non-executive directors are being appointed.  They carry the responsibility for this important task. 
 
Another important step is helping savers better understand their investments. Through auto-enrolment and the pension freedoms, more UK savers than ever before are relying on our industry to provide for their futures. We need to be able to explain what we do in a way that doesn't require an economics degree. This means explaining the objectives of their funds in clear and simple language, so that savers can choose the products that best help them achieve their financial goals.
 
Looking ahead, we have also proposed a new long-term asset fund which can help to unlock the investment in infrastructure our communities and businesses dearly need, while helping savers spread their risk and sources of investment return. Such a fund would be subject to rigorous customer protection measures to ensure confidence, investing over many decades and moving away from daily withdrawals.  This new type of fund would prevent the issues that we have seen recently, and going a step further we are issuing new guidance to investment management firms on how they manage risks and liquidity in investing.
 
By heeding the lessons and taking firm action, we want to demonstrate our determination to deliver returns for our savers and investors, helping them achieve their financial life goals. 
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