“The statement of principles, the launch of the investor forum, the pounds-and-pence cost disclosure measure that comes into effect in 2016 are good examples of that,” he says.
“Our expectation is that such initiatives mean we are being seen not just to wait for regulators to tell us what we need to do, but rather taking our destiny in our own hands.”
And, he adds, working out for themselves what needs to be done is a big builder of confidence between the industry, regulators, media, policymakers and consumer groups.
“We want to be in a position that when we say this is the best way to ensure the best possible consumer outcomes, we are not just seen as a self-serving organisation defending the indefensible.”
Highly classified
It has not, however, all been one-way traffic.
One of the areas in which the Investment Association has come in for criticism is for its sector classifications, particularly the growing number of funds found in the unclassified sector, as well as for the stringent criteria funds need to meet to make it into the equity income sector.
Says Godfrey: “We are looking at a number of areas in terms of the sector classifications. We are trialling new methodologies for a primary share class and there is an obvious path of progress there.”
The trade body has also done a lot of work with regards to outcome-based funds, many of which are responsible for swelling the ranks of the unclassified sector. Here, too, progress has been made, but more needs to be done, Godfrey says.
The Investment Association issued a consultation paper in February proposing three possible routes, including a major overhaul of the sector classification system.
He explains: “The responses to the consultation were unclear. We had pretty much equal weight for each of the three options, which gives you a bit of a problem; we are having to think about the implications of that. Certainly, more needs to be done but, as with everything, the pace of change is slow.”
Joint decisions
On the question of income funds, Godfrey has a more definitive answer.
“Every time we are challenged on it, we ask ‘Do we need to review what we do?’. At some point, the sector committee will take another look at income funds.”
But, as he points out, the decisions about how the sectors work are not made by one person but by a committee of people comprising both providers and users.
In the case of income funds, it is important to remember that the primary benefits of a sector classification accrue to those people buying funds rather than those who already have a fund.
“Sectors are useful if you are thinking of changing to a new fund or, if you are investing for the first time, you want something with a current high-yield premium.
“It is much more nuanced than saying why a fund should be thrown out for doing well. We need to think about what the people shopping for funds are looking for. But that doesn’t mean it’s not something we can’t improve the methodology of.”
