Mps demand investor compensation as scale of fund overcharging revealed

Jonathan Jones 02 March 2021 12:24pm GMT MPs have demanded fund groups compensate investors who were kept in expensive contracts when cheaper alternatives were available, as new research

revealed the scale of the scandal. Investors are only now being switched out of expensive fund share classes that paid commission to financial advisers who sold them the funds. Around half

of funds with these contracts have now moved customers to cheaper share classes, saving them £120m in fees every year, according to data from research firm Fitz Partners. Commission payments

to financial advisers were banned by City regulator the Financial Conduct Authority, but only on funds sold since January 2013. However, fund groups argued they have only been able to bulk

transfer customers from these older, more expensive contracts since 2018, when new rules were introduced. Kevin Hollinrake, a Conservative MP and co-chairman of the All Party Parliamentary

Group on Fair Business Banking, said: “It’s really disappointing. It is clear that they should refund the money and if they won’t do so themselves then the FCA should step in and make them

do that.” Expensive fund charges have been highlighted in fund groups' value assessments, mandatory reports they were forced to publish for the first time last year to justify the value

they provide to their investors,  pushing firms into action. Baroness Ros Altmann, the former pensions minister, said it was “most disappointing”  that large investment firms had not moved

their customers sooner. “Surely companies who take customer service and care seriously should consider refunding those who were not offered the chance to move to the cheaper funds for

years,” she added. Invesco, the asset manager, transferred 107,000 customers from to cheaper share classes last year, while Jupiter moved 49,000 investors which had bought funds directly

from the group out of more expensive contracts.  Columbia Threadneedle switched 30,000 customers while Schroders moved 26,000, saving them around £8m per year. BlackRock, the world's

largest asset manager, said 14,000 investors would save £4m after switching customers from more expensive share classes. Rushanara Ali, a Labour MP and member of the Treasury Committee, said

she welcomed the moves now being made by fund groups, but added that “there remain questions as to why this has taken so long.” A spokesman for Jupiter said the firm was “committed to doing

our best by all of our clients” but that the company had no plans to reimburse investors, adding that the changes were made “as soon as was practicable”. A spokesman for BlackRock said the

firm had moved investors into cheaper share classes, waiving minimum holding requirements that had been in place. Schroders said it had converted a further 2,500 investors since its value

assessment report and continuously reviewed its funds' fees. A Columbia Threadneedle spokesman said funds were continually reviewed and the group had taken “additional steps to improve

value for customers over the past few years”.  Invesco had not responded at the time of writing. The FCA declined to comment.