M&G sent out incorrect statements to 10,000 customers about how much they were being charged in fund fees, highlighting the opaque and complicated nature of the wider industry to customers.
The Times revealed over the weekend that the FTSE 100 firm told customers they had paid twice as much in charges as they actually had. The error was only acknowledged after a customer calculated his own fees and flagged the mistake to M&G twice.
The issue was with the creation of custom charges statements for M&G’s direct customers. However, despite the inflated figures on the statement, customers were charged the correct amount. The mistake was rectified by M&G at the beginning of March and customers were issued with correct statements. Those invested through a third-party platform were not affected.
No one charged the wrong amount
An M&G spokesperson said this was a mistake and the firm was sorry it may have confused some customers.
“At no point did we actually charge anyone the wrong amount for the funds that they are invested in,” they said.
They added the error had been identified and that they “can ensure it doesn’t happen again”.
M&G also highlighted that it had simplified its fee process in August 2019 to make them more predictable, as well as cut fees across 45 of its mutual funds in February.
Undermines investor confidence in industry
SCM Direct chief investment officer and founding partner Alan Miller (pictured) said: “Such occurrences undermine investor confidence not just in M&G but the industry as a whole.”
He added: “M&G and others should show the total charges as a percentage and in pounds and pence as legally required, correctly calculated in prominent places including their factsheets and website rather than once a year in an annual statement.”
Open Money founder Anthony Morrow said this is an example of “how complicated and opaque the industry is for many customers and this turns people off because they don’t get comfortable understanding what they’re doing”.
Proper competitive forces
He added: “There have been so many attempts and initiatives by the industry over the last 20 years to make things ‘plain and simple’ but to see how little progress has been made the conclusion must have been reached that it’s not in everyone’s interests to be transparent about costs.
“There is probably worry that if customers were told upfront how much they could get charges they’d do something unimaginable and compare them against other options. The industry might have to deal with proper competitive forces at last.”
