I’ve been a journalist all my working life. It’s a calling I’m passionate about. And I’m also interested in the investing industry. So when I read John Kenchington’s leader in FT Adviser about the importance of financial journalism I found myself instinctively agreeing with it. Journalists have a critical role to play in providing investors with useful and unconflicted information.
Unfortunately, though, the lines between journalism and advertising in the money pages of the UK press have become extremely blurred. It’s alarming to see staff of fund managers and retailers effectively employed as columnists, and the same funds and managers being talked about all the time. I don’t care if he has the mother of all public relations budgets, but the almost daily updates on Neil Woodford’s new fund are really starting to grate.
There is, in fact, a wealth of independent, peer-reviewed evidence dating back to the 1950s that ordinary investors are better off avoiding high-fee, actively managed funds altogether. Some journalists are aware of this; others, quite clearly, are not. But by constantly writing about active funds, with very little reference to the data or to the cheaper and better alternatives on offer, I’m sorry to say the UK money media is inherently biased and has been for many years.
Too often fund managers are presented as “experts” even though, as a group, they’ve performed abysmally over both the long and the short term. Fewer than 1% of managers manage to be a the market with any degree of consistency. Genuine experts, who’ve studied fund performance and the impact of compounded charges in detail - people like David Blake at the Pensions Institute or the Nobel laureates William Sharpe and Eugene Fama - barely receive a mention.
Kenchington’s article was actually in response to a piece by Dominic Hiatt in The Adviser Lounge which laments declining standards in financial journalism. There’s now a strong case, says Hiatt, for financial firms to produce their own content and to divert traffic away from the traditional media websites.
I happen to agree with Hiatt as well. There is definitely a place for branded content. Everyone has some kind of agenda, and high-quality content has to be paid for somehow. As long as you’re transparent about it, there’s nothing wrong with that. Take, for example, our own documentary, How to Win the Loser’s Game, which was funded by a firm with a low-cost evidence-based investment philosophy. Without that funding, this landmark film, which is benefiting investors all over the world, could never have been made.
Our documentary makes very uncomfortable viewing for active fund managers and retailers, and some within the industry have called it biased. We did, in fact, interview the Chief Executive of the major UK trade body, the IMA, and invited more than 20 active fund management firms to take part, only one of which agreed.
Yet brand journalists are allowed to play by different rules to traditional journalists. The whole point of content marketing is to put across a particular point of view. In our case, the reason for making How to Win the Loser’s Game was to counter the in-built bias in the money sections in favour of active funds and what we believe is the highly misleading impression created by fund advertising. If we’ve put some prominent noses out of joint in the process, then so be it.
Newspapers need to ask themselves some key questions. Even if the fact that the money sections are effectively paid for by adverts for active funds has no impact on editorial content, are they providing readers with the full picture? Are they really helping consumers to make sensible investment decisions? The answer to both those questions, for now, has to be an emphatic No.
My own view is that, from the reader’s point of view, the money sections serve no useful purpose at all. The industry loves to make investing seem complicated - that’s one of the ways it justifies the colossal charges it levies - but in fact it’s relatively simple. Most investors should keep costs low, diversify as widely as possible, rebalance occasionally, but otherwise do nothing. The fact, for example, that someone’s launched a new fund, or that some analyst thinks US equities are due for a correction, really isn’t important. We call it “noise” - an unhelpful distraction. Investing is (or should be) dull. And dull doesn’t sell newspapers.
Of course, the irony is that there is a genuine story to report, and a huge one at that. A story that’s been festering, right under journalists’s noses, for the last 20 years. That story was “broken” this week, not by a newspaper, but by the Financial Services Consumer Panel. In a damning report, the Panel describes an exploitative and “largely unchallenged” industry, averse to change, that wields too much power at consumers’ expense. This truly is, as our colleagues at the True and Fair Campaign have said, a “national disgrace”.
Who should have challenged it? Regulators, yes. Politicians, of course. But, most of all, journalists. Yes, we’ve all let the consumer down. It’s time for money journalists to make amends, hold the industry to account and help bring about reforms that are long overdue.
Robin Powell is a director of SensibleInvesting.tv and is the producer and presenter of How to Win the Loser’s Game. He spent more than 20 years in broadcast news, with ITV, the BBC and Sky.