It's time to clear up the fund charge confusion

A campaign attacking fund management charges on investment and pensions was launched this week. The True & Fair Campaign is calling for greater transparency on investment fees and the introduction of a fee-labelling system.

The man behind the campaign claimed his research shows that there are £18bn a year of hidden dealing charges. Alan Miller, co-founder of wealth manager SCM Private, said: "Consumers have been comprehensively misled by the investment management industry."

But Richard Saunders, of the Investment Managers Association, refuted the claims. "So-called hidden charges which cost investors billions a year are a complete myth," he said.

What is obvious is that there is confusion about how much to pay for investments and pensions. Mr Miller said the key issues are hidden fees, lack of product transparency and the convoluted language which the investment management industry uses. "The odds are stacked against consumers being able to make informed and competitive investment decisions," Mr Miller said.

Anyone who has tried to compare the costs of investing in different funds would have to agree. With upfront charges, annual fees and other trading and commission to bear in mind, a breakdown of all costs and fees should help. But will it prove a simple solution?

No, said Nick Blake of investment company Vanguard. "Trying to over-simplify complexity into one argument, be that on fees or performance, may do a disservice to investors who need clearer support and guidance on a number of areas," he said.

Exchange-traded funds, he pointed out, are often used as examples where costs are much cheaper for investors. But even then the quoted fee may hide other charges.

Indeed, SCM, Mr Miller's firm, quotes a 0.75 per cent annual management fee and proudly proclaims "no hidden fees". Yet its website says the management fee covers everything "except dealing costs and the underlying expenses". How much will they add to the charge? Around 0.4 per cent, according to sources.

Mr Miller said the new code will provide 100 per cent transparency by showing the whole range of fees and the resulting all-cost for investment. Fund manager Fidelity, similarly, has this week called for a charging structure that must be simple and easy to understand. But it hit out at misleading pricing.

Gary Shaughnessy of Fidelity said: "We are seeing selective and partial 'Ryanair' pricing start to emerge which runs the risk of misleading investors about the real costs they are paying. A consistent way of showing charges is essential."