Red alert on fund managers who are just too close for our comfort

The most popular savings category among us members of the public is the active UK equity fund. These are "actively managed" by fund managers using their expertise to buy and sell shares regularly as their hunches dictate, rather than simply tracking an index. Quite why UK shares remain so popular given the state of our economy baffles me, but there you go.

The amounts we've got in these funds is mind-boggling - £76.67 billion on a recent count. But here's the rub. Research from SCM Private found investors owning 73% of that cash were being charged by their fund managers an identical 1.5% a year. Seventy-three per cent! To spell it out in full, that's £55,728,469,170 of our savings all being run by fund managers charging exactly the same "max annual fee" (to use the jargon).

What is SCM Private? Admittedly, it's a small fund manager rivalling the big boys, so it does have an axe to grind. Its boss, Alan Miller, was chief investment officer at fund manager New Star (leaving long before the doo-doo hit the fan there, since you ask). When it comes to discussing his rivals, "cartel" is one of his favourite words. While he's not the most independent of souls on this issue, his stats are based on figures crunched from Morningstar, the respected monitoring group.

What's more, the Investment Management Association regulator seems to accept his findings, with some unconvincing caveats, more of which later.Where does all the money go? Anecdotally, it seems that from the 1.5% fee, the fund manager typically pays the distributor - an independent financial adviser or the like - 0.5% and levies a "platform charge" of 0.25%. The rest - 0.75% it keeps for itself. Everyone's happy, except, perhaps, the punter. The cosy structure has apparently even got an unofficial name among some in the industry: "The 1.5% Model".

Now, if you went shopping for a 32-inch HD telly and found that, across all manufacturers, nearly three-quarters were charging exactly the same price, wouldn't you be scratching your head? Or, dare I say, phoning the Office of Fair Trading? The IMA politely dismisses my suggestion that something funny may be going on. It says: "The UK asset management industry is a highly competitive market, with over 2400 funds and over 100 managers."

SCM, it points out, only looked at one type of fund. That's true, but it is the most popular type, particularly among first-time investors. It also stresses that the annual fee includes loads of services including "the safekeeping of your assets". Well, thanks for that.

I'd counter that you also often have to pay a pile of other costs - typically a 5% upfront initial charge - to cover those services.

I guess you could argue that 1.5% a year isn't much. But in a world where the Footsie is down more than 6% this year and inflation's running at more than 5%, poor punters need all the help they can get. Tougher competition among fund managers would help.

Greece leaving the eurozone? That would be a real tragedy

"Greece will just have to quit the euro, devalue its currency and start afresh. Give it a decade and it'll be a healthy, wealthy competitor to the rest of Europe."

How often we've heard that simple, clean and logical solution to Greece's, and the eurozone's, woes. The idea's even gaining some currency - if you'll forgive the pun - in Greece itself.

But it shouldn't be seen as either simple, clean or logical. Messy, painful and self-defeating is more likely.

A quick dose of reality: If Greece's leaders signalled a move from the euro to a devalued drachma, Greeks would, en masse, withdraw their savings and move them abroad. Greek banks would collapse.

Starved of credit, small and medium-sized firms would go bust. Larger ones would follow.

Unemployment would soar. Civil unrest would become so intense that the country would be virtually ungovernable. The political class, already loathed, would face a real threat of revolution as it struggles to cover the police and army payroll.
That is, if anybody of working age is left in the country. Like in the days of the colonels - not so long ago - swathes of the population will up sticks and migrate to the northern EU states.
The resulting immigration complaints would be only be a fraction of the problem for the wider eurozone. Investors would take fright from other indebted nations' debt. Further sovereign defaults would follow.

Thankfully, all this is now less likely to happen. Prime minister George Papandreou's enforced retirement means that Greece woke up this morning to a more certain future within the eurozone.
It will for years - perhaps decades - be the sick man of the region. We will get used to grumbling German handouts. But that's nothing new. From Wales and Scotland to Mississippi and Idaho, currency unions have always had economic runts in the litter given financial succour from their stronger siblings.

With Papandreou out of the picture, the eurozone should now keep Greece on board. It will be an Odyssean journey back to any semblance of stability, but the alternative's far worse. So let's have less loose talk about booting out the Greeks.