The funds industry in Ireland feels put upon, but a quick glimpse at a recent report on the sector suggests that at least part of the problem is of its own making.
The report — Funds Sector 2030 A Framework for Open, Resilient and Developing Markets — takes two full pages to explain almost 150 acronyms in common currency in the sector that are littered through its 118 pages. Put simply, the industry speaks in a language that is actively designed to shut out the very customers on whom it relies for its success.
This is a pity because, if it could speak plainly, the industry has a reasonably compelling argument that the tax system around Irish funds is Byzantine and, to the ordinary investor, illogical when placed alongside the regimes for direct equity investment, capital gains and income. Most relevant for consumers, it essentially incentivises them to take greater risks with their money — for instance by investing in single stocks rather than more widely spread products like exchange-traded funds — than is sensible for most people.
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And the inevitable result is that people — who are generally risk-averse — end up leaving most of their money in basic deposit accounts where it earns far less than it otherwise could, over time.
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The industry can also feel somewhat aggrieved that, having finally persuaded Government that the sector is worth a review to see if things can operate more efficiently — to the benefit of the funds, their customers and the exchequer — the report has been published in the dying days of the administration with no prospect of action.
Former minister for finance Michael McGrath had hoped to have the report to hand in time for the budget. But by then he had moved on to a role in the European Commission and without the impetus he might have provided, the report quickly fell into the “not critical” category.
Irish governments are very attached to the notion of long-fingering action on tricky issues where there is no immediate evidence of vote-winning potential. It is an extraordinarily wasteful approach both in terms of the time invested by authors and contributors to such assessments and the money they cost.
Funds need to mobilise potential customers, helping them understand the lost opportunity for financial improvement under the current system so that they help press the case for reform on the politicians who have the power to institute change.
Doing that requires the industry to explain how it works and the shortcomings of the current regime in language people can understand, not a word soup of jargon and acronyms.
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