IFSA moves for clarity on returns
The Investment and Financial Services Association (IFSA) has moved to make it easier for investors to compare after-tax returns with the release of a guidance note that calls for a standardisation of practices, procedures and terminology.
The guidance note, launched yesterday, suggests that if all scheme operators calculate their returns on a comparable basis, it will be possible to compare returns between products.
It said that return calculations should take into account any fees or costs incurred by a scheme holder when investing in the scheme generally.
The guidance note urges members of IFSA to ensure they comply with the principles in respect of after-tax returns that allow comparability, use of standard terminology and consistent and transparent methodology.
“If after-tax returns are to be used to compare the investment performance of products, then all returns should be calculated on a comparable basis,” the guidance note said.
It said consistency should be sought with regard to after-tax return calculations and that for consistency with generally accepted practices, returns for periods of less than a year should be annualised, albeit that given the complexities of reporting after-tax returns, it did not recommend reporting for periods of less than a year.
The guidance note said transparency of calculation was required so that researchers, scheme holders and financial planners could reproduce the returns published by scheme operators.
AUTHOR
Mike Taylor
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