There was good news for investors this week: confusing fund sector names will be scrapped to "bring about a better understanding of the sectors and how they fit together," as Jane Lowe, director of markets at the Investment Management Association put it.
The move will see the end of such confusing names as Cautious Managed, Balanced Managed and Active Managed. As the IMA rightly concludes, investors have never really understood what the titles mean. And that kind of confusion is a recipe for putting your cash in the wrong funds.
The IMA set up a review last autumn to look at the titles and seek improvements. It consulted experts in the funds industry and the wider financial sector, and some months later, has finally released details of what the new sectors will be called.
But the change is far from an improvement.
From July the three confusing Managed sectors will be renamed Managed A, Managed B and Managed C. Further, a new sector, to be called Managed D, will be created next January for funds which should offer less risk than those in the current Cautious Managedsector.
The new names will make them as clear as mud. The IMA says: "The new sector names have been chosen in order to highlight that the funds are in some way managed."
Hmm. That doesn't make things much clearer to me. Patrick Connolly, of the financial adviser AWD Chase de Vere, is critical of the changes. He says: "Using the headings Managed A, Managed B, Managed C and Managed D will provide little clarification or understanding for consumers. If anything it may confuse them still further."
Gary Shaughnessy, of the fund manager Fidelity International, is also critical. "To say we are disappointed in the outcome to this review is an understatement," he says. "The IMA has said that it is important that these sectors are properly understood by investors, but in our opinion the new sector differentiations are meaningless and actually increase the opacity for investors."
There's also disappointment that the IMA hasn't acted as yet to change the misleading Absolute Return sector. As Mr Connolly says: "The name Absolute Return gives the perception of security and implies that funds will give a positive return in all environments. This is clearly not the reality."
The opportunity was there to improve our understanding of different investment funds. The IMA appears to have – to put it in plain English – completely cocked it up.
Dodgy debt management companies have been back in the news this week after the BBC accused some of holding on to clients' cash rather than paying it to creditors. The practice is illegal and can push hard-up families over the financial edge.
It can happen because the most unscrupulous companies prey on frightened debt-laden people. Debt management can be a crucial tool in helping people restore their financial well-being. A legitimate manager will talk to creditors on behalf of a borrower and may be able to negotiate reduced rates, freeze interest, or even offer a reduced but affordable repayment deal.
But the BBC suggested that some debt managers have adopted the tactic of accepting money from people in debt but not passing it on to creditors. The companies keep the money back as a ploy to try to negotiate a lower settlement with creditors. But if a company goes out of business – as a number of debt managers have done – some or all of the money could be lost, putting people in an even worse financial position.
The OFT is promising to look at the issue, but anyone with debt problems doesn't actually need to pay for debt advice as there are a number of charities that offer it for free. For instance, the Consumer Credit Counselling Service has a free online counselling tool – Debt Remedy – at www.cccs.co.uk or debt advice is free at local Citizens Advice Bureaux.