I love a curry!
My favourite dish is the Murghi Mosala and includes lumps of succulent lamb, a spicy but not mouth burning sauce and it’s all topped off by a whole boiled egg.
In my opinion (and in the opinion of no one else I’ve ever spoken to!) there’s not many meals which can’t be improved with the introduction of a boiled egg. I’m doubtful whether it’s a trend I’ll end up seeing on master chef!
Luckily the curry house around the corner from where I lives cooks a mean Murghi Mosala and therefore if I fancy a lamb and egg based carry concoction I’ve not got too far to travel.
I can walk the 5 minutes it takes to get there to collect it, although the Chili Tree (my Indian restaurant of choice) does deliver for free if I order above a certain amount.
I know how much it’s going to cost me….6 pounds and seventy five pence.
In our profession there has been a consistent focus on the cost of our services to clients. As a business we’ve done loads of work around making sure our costs are clear, fully transparent and easy to understand.
Why? I reckon that the Chilli Tree has a really decent business model.
Obviously my entire business model is based on looking at best practice across a range of different professions and industries, however I don’t deny I admire the way Tahib runs his business…
You see they deliver in terms of service each and every time (I’ve never had a bad curry out of the chilli tree!) and each and every time at a price I’m comfortable with, represents decent value and keeps me coming back time and time again.
Also, regardless of whether he’s had to employ another person in the kitchen, or has had some of his ingredients ruined, or had a particularly expensive utility bill, and although these things obviously will impact his profitability his price stays relatively constant and clear.
The reason I like this approach is that it engeders trust. I know what I’m getting and what I’m paying for. I’m not concerned about the cost so much as the value i’m getting however the fact that I know the price clearly makes me trust the process of my (often too) regular curry purchases even more.
However it seems that the custodians of the money our clients choose to invest don’t feel the same way.
We’ve got AMC’s, TER’s and every other cost not included in these amounts.
We’ve got Clean share classes, Dirty Share classes and “Super” Clean Share Classes.
We’ve got dealing charges, potential discretionary costs and everything else included in the cost (I’ve not even started on the charges for holding the money in a particular ‘home’)
The costs custodians charge to look after our clients money can be overly complicated..
..and we need to do something to make it easier.
Regulation has rightfully made the advice market a potentially more open and transparent place. This will help towards building an environment of trust with the people we want to help.
However if as an advice community we’re aiming and evolving into transparency and the fund managers, product providers and discretionary houses all how they charge as complicated as possible surely all we’re doing is a hokey cokey (i.e. putting one leg in and one leg out).
Whilst I haven’t got the answers here’s a suggested solution…
“Curry House” Fund management (or the Murghi Mosala Model)
1. A fund manager (or any form of investment manufacturer) gives a percentage rate.
2. This percentage is the total cost without exception.
3. Every fund manager is legally obliged in “big print” on their fund fact sheets (all of which should be in the same format across the entire fund management industry).
4. If a fund (or a bunch of funds) is held within a particular platform the cost of fund and cost of platform should be disclosed in two numbers, not three, or four, or twelve….and again shown in ‘big print’ on any disclosure documents on the front page (like, for example the difference between ‘eat in’ or ‘take away’ prices)
5. If a fund manager incurs costs they hadn’t expected or hadn’t disclosed they need to accept this liability as the cost of running business short term and potentially increase the ‘headline’ charge to accommodate the additional cost longer term.
6. If the ‘headline charge’ changes the fund manager needs to write out to all clients to notify the change with plenty of time in advance.
….and a few points more!
The key factor here is simplicity, transparency and the perception of value is fundamental in any business. However that needs to start with a willingness to change or a regulatory nudge in the right direction.
I’m wondering what needs to be done for this to happen in the world of the investment custodians…
However, these are just my thoughts and I’m interested in yours…
Do the companies managing our clients money need to be clearer when it comes to charging? or is the current situation adequate?
Is there sufficient political or regulatory will to innovate and clarify charges in the world of fund management?
Why might the ‘curry house’ model of transparency, inclusive costs and responsibility for business costs not work in the fund management business? or might it?
As ever I’m looking forward to hearing your thoughts..
And with that….I’m off for a nice Ruby!