Mutual Funds asked to make fee structures clearer & easier to understand

Britain's financial watchdog has urged Mutual Funds (MFs) to make their fee structures clearer, easier and more consistent as it would encourage people to make more savings for their old age.

The Financial Conduct Authority (FCA) said some MFs didn't provide investors with clear and consistent figures for charges in their prospects, marketing material or on websites.

A review of MFs' fees structures by the financial watchdog found that a number of fund managers were making use of the annual management charge figure as headline fee in their marketing material. But, this figure doesn't include other substantial costs. The Investment Management Association (IMA), an industry body, has already said in its guidelines for fund managers that they should make use of only the so-called on-going charges figure instead.

Clive Adamson, director of supervision at the FCA, said, "We believe that it is important for investors to clearly understand and compare charges across the market as this, together with fund performance and risk profile, are the key areas that they should look at."

Adamson urged all MFs to respond to its findings and review their arrangements to ensure the clarity as well as consistency that it believed to be important.

The FCA's suggestion comes as a number of critics say that MFs' fee structures are very confusing, which discourage investors and hinder competition.