Asset manager Vanguard calls for fund fees 'health warning'

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[February 20, 2017]  By Simon Jessop and Carolyn Cohn

LONDON (Reuters) - Vanguard, the world's second biggest asset manager, called on Monday for a 'health warning' to be attached to funds to help investors understand the impact fees have on their returns.

 

Vanguard managed $4 trillion in assets at the end of January 2017, mainly in low-cost passive funds, a spokesman said. Around $1 trillion of this is in active funds, the spokesman added.

The suggestion formed part of its response to Britain's regulator, the Financial Conduct Authority, which in November released its interim findings into the asset management industry as it looks to boost competition and value for money in the sector.

"Performance is a potential. Costs are a certainty, hence investors should focus as much, if not more, on costs," Sean Hagerty, Head of Vanguard’s European business, said in a statement.

"A 'health warning' on the impact of costs would be a clear sign of intent from the industry that it's putting the needs of the investor first."

Warnings on fees should receive equal prominence to current warnings on past performance not being a reliable indicator of future results, Vanguard added.

The FCA said last year it planned to overhaul the way Britain's 7 trillion pound ($9 trillion) asset management industry operates to ensure both retail and institutional investors get value for money.

The regulator flagged widespread concern about the performance of actively-managed funds relative to the fees charged, the level of competition in the industry and the information shared with investors to help them make decisions.

Among its solutions were one "all-in" fee so investors can easily see what is being taken from the fund by the manager.

The watchdog's final report, along with any proposed rule changes, is expected to be published in the summer. The deadline for consultation responses was Monday.

($1 = 0.8028 pounds)

(Editing by Ruth Pitchford)

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