IDEAL FUND

Those with enough grey hair would say that we are going back to the future, and that these funds sound like the balanced funds run by corporate pension funds of old. Essentially this is correct. However, this is not a product that companies will offer any more. Blame the passing of life-time employment or the advent of fair market accounting of corporate pension fund liabilities, but whatever the reason, individuals are having to take responsibility for their own pension. To do so, they need to be better equipped and supported than they are at the moment. A key concern of this report is the absence of independent, unconflicted advice for long-term savers at a time when more financial risks are being shifted to individuals by governments and employers. The report discusses some radical ideas on improving investor education. I am a little sceptical over what can be achieved in this area. Many highly numerate, sophisticated, experienced investment professionals lost their savings and jobs in the credit crunch, suggesting that a little more education of investment amateurs would not have made much difference. One idea I do like is for fund distribution companies to place a small fee whenever they have achieved a sale into a pan-European investor education pot which funds an investor education voucher for every citizen. This voucher could be spent on independent financial advice.This would help create a private market in advice that is separate from fund distribution, fund management and government, while at the same time ensuring that low-income savers have access to advice even though their savings pot may be smaller. Ultimately if these investor education vouchers are paid by the distribution companies it comes out of the returns of investors, but a system where successful fund distribution finances independent investor advice on funds has built in checks and balances. This report raises the critical questions and offers some interesting practical answers. In so doing this report will help to set the debate over the fund of the future. I strongly commend it to you.

Avinash D. Persaud Chairman, Intelligence Capital Limited; Chairman, Warwick Commission; Member, UN Commission of Experts; and Pew Task Force on Financial Reform.