A big step towards cost transparency

Stephanie Baxter
clock • 1 min read

Stephanie Baxter says the launch of a transparency code shows the balance of power is finally starting to move in the direction of investors.

Cost transparency is a big buzzword these days, but it was once ridiculed. Nine years ago, Dr Chris Sier took on a big fight with asset managers by looking into the true, hidden investment costs incurred by pension funds, such as the Local Government Pension Scheme (LGPS).

He rightly questioned how schemes could know they were getting good value for money from their asset managers when they didn't know the true cost of investment?

He and a few others that held the same belief received huge backlash from the industry - sometimes even threats - and were told time and time again that things would never change.

So it is a big achievement that last week the LGPS Scheme Advisory Board (SAB) launched a transparency code for asset managers, based on Sier's 2015 proposal for the Financial Services Consumer Panel, which is in turn based on the Dutch disclosure model. While voluntary, any asset managers that refuse to comply will risk being sacked by clients.

Its significance will be felt beyond the LGPS, because the Investment Association is developing an almost identical template for the wider sector, to maintain consistency.

For Sier, this is the first time he has seen two sides of the fence - both pension funds and investment managers - saying ‘we agree this is a good idea'. A key lesson here is that collaboration and perseverance really can make things happen.

The balance of power is now finally starting to move in the direction of investors; the code should help lead to better alignment of interests between pension funds and their asset managers.

With £217bn total assets under its belt, the LGPS should see this as an opportunity to create real change.

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