Biting the hand that feeds — journalism and the fund industry
Posted by Robin Powell on June 3, 2016
As a journalist who now works mainly in the investing space, I’m fascinated by the interface between those two very different worlds.
The investing industry’s “sell side” needs the media. Asset managers in particular spend a fortune on advertising; indeed without those ads the money sections of national newspapers would probably no longer exist.
But as well as advertising space, the industry wants editorial influence too. Bluntly, it needs journalists to keep writing about its products. So it pays financial PR companies to bombard news desks with press releases to feed the insatiable demand for “stories” and “expert” comment; it funds glitzy awards nights where the winners are often the journalists and publications who’ve been the most “on-message”; and it offers journalists boozy lunches, tickets to sporting events and even junkets overseas. All of which is paid for, ultimately, by consumers.
This whole issue of editorial influence is an extremely sensitive one for us journalists, and I can honestly say that the majority of journalists I’ve worked with have had very high standards of professionalism and personal integrity. We have some truly outstanding financial journalists in this country. This is, nevertheless, a subject that raises important questions for end investors — the people who, let’s face it, the investing industry is supposed to be all about.
Every week, literally thousands of Britons are retiring with insufficient funds to last them for the rest of their lives. Yet, in both the mainstream press and the trade media, the investment products that are talked about more than any other are those that are so laden with fees and charges, many of them hidden, that over time will seriously erode the savings of ordinary people.
These products are, by and large, the same sort of products that have been touted in the media for decades, and which, according to data produced by the likes of S&P Dow Jones and Morningstar, have consistently failed to beat their benchmarks over any meaningful period of time.
Research by Cass Business School has shown that the vast majority of UK fund managers fail to deliver long-term outperformance, and that even those who do so recoup for themselves any value they add in the form of fees. The Cass study is entirely consistent with scores of other peer-reviewed studies from around the world, dating back to the 1950s.
So, why is this happening? Why the mismatch between what the independent evidence says, and what most journalists say, about how best to go about investing? Should we (or indeed can we) do anything to align the interests of media publications more closely with those of consumers? Is this something that regulators (financial media or both) need to look at?
On Wednesday 22nd June I’m going to be tackling this very subject in a presentation to the Transparency Task Force Symposium in London on, called Biting the Hand that Feeds: Journalism and the Fund Industry. There are still places left, so please sign up. Other speakers include the former Business Secretary, Vince Cable, and Tom Tugendhat, the Conservative MP who recently raised the issue of lack of transparency surrounding fund fees at Prime Minister’s Question Time.
If we really are interested in producing better outcomes for investors, this is a debate we need to be having.
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