The Investment Association (IA), the UK asset manager trade body, has opened up a consultation on fund charges disclosure as the industry and regulators move towards a standardised approach.
The trade body is seeking feedback on its draft code for the reporting of charges and transaction costs, to establish a more consistent approach across the market and in line with regulatory requirements.
It noted that a consistent disclosure mechanism accommodating “as far as possible” UK and EU requirements would benefit both investors and the industry.
Charges disclosure is currently under review as part of the Financial Conduct Authority (FCA) study of the asset management industry, the final report is due to be published during the second quarter of the year.
However, no timeline for potential changes to charge and transaction cost reporting have yet been set, the IA noted.
The code is intended to facilitate provision of data under Mifid II and PRIIPS regulation and full compliance with the FCA’s final rules for the UK defined contribution market. The IA noted that it would also adapt the code to the conclusions of the UK regulator’s asset management market study.
“For clients, it will be possible to compare across different managers and products using a common set of definitions and terminology,” it noted.
“For industry, there is a benefit of avoiding reporting system proliferation and potentially inconsistent reporting across different product lines.”
Jonathan Lipkin, director of public policy at the IA, said: "The asset management industry is fully committed to transparency and recognises the need to provide clear disclosure of both charges and the transactions costs incurred as part of the investment process.”
Lipkin said the new code would provide a common framework for disclosure across investment products and services.
He added: "The IA would like to work with the FCA to seek regulatory recognition for the new code in the FCA's conduct of business sourcebook.
"This consultation is designed to encourage feedback from industry, consumer, government and regulatory bodies on the proposed approach ahead of the code's final implementation and we welcome views from all stakeholders."
The code follows similar measures under review for the pensions industry where the UK Department for Work and Pensions is currently considering how best to disclose charges and costs to pension scheme members as part of requirements under the Pensions Act 2014.
Indeed, it has already received backing from the Pensions and Lifetime Savings Association (PLSA), the national association for pensions professionals.
Graham Vidler, director of external affairs at the PLSA, said: “The PLSA has always recognised the importance of understanding transaction costs in order to ensure value for money on behalf of scheme members; and it’s good to see the IA taking steps to standardise disclosure.
“We will respond to the consultation, with a focus on ensuring that the code permits consistency and comparability.” 
Patrick Connolly (pictured), head of communications at Chase de Vere, says the IA may have been prompted to act as regulatory and investor pressure for a more transparent solution increases.
He said: “It’s a positive step, but it’s probably something that it’s[the IA] have been forced into rather than something they would have chosen voluntarily.
“Transparency and charges are not going to go away.”
“The IA has two choices: Fight a battle it is not going to win or address the issue. It looks like it is doing the latter.”
He added: “Investors will be benefited whether as a result of what the IA or by other measures being forced upon the investment industry.
“It’s good to see that the IA is trying to be proactive and moving to the right place.”
Adrian Lowcock, investment director at Architas, said: “Overall the charging structure we have is a bit of a legacy of a bygone era.
“Everybody acknowledges that there could be greater transparency and that there needs to be.”
He added: “My overall criticism is that going from AMC [annual management charge] to OCF [ongoing charge fee] is that all these acronyms haven’t been particularly helpful for investors.”
Lowcock says there is a strong argument for detailed charges that can be then broken down into constituent parts that investors would be more comfortable with.
“People just want to know post-RDR [Retail Distribution Review] how much a fund is going to cost them,” he explained.
The IA said it would welcome comments from all interested parties on the proposed code and would be particularly interested in hearing from clients of the asset management industry on whether the recommended disclosures “aid them in their decision-making when setting and reviewing investment strategies”.
Deadlines for responses to the consultation will close 19 May, with publication of a final set of proposals planned for the third quarter of the year.