We use cookies to improve site performance and enhance your user experience. If you'd like to disable cookies on this device, please see our cookie management page.
If you close this message or continue to use this site, you consent to our use of cookies on this devise in accordance with our cookie policy, unless you disable them.

Close

Fund costs still major issue

Fund costs still major issue

In spite of much publicity at launch two months ago, a campaign for greater fund charges transparency (www.trueandfaircampaign.com) has only 293 supporters so far.

Investors know that the fund management industry charges too much and could be much more transparent on fees. It has been impossible to avoid this following lots of noise from Alan Miller (behind the above campaign) and the launch of Fidelity's own fund fees campaign, all backed up by research on the shocking cumulative cost of fees from TCF Investments.

But is this noise on fund fees just the "cheap PR trick" that Hargreaves Lansdown claims it is? "Transparency of charges is an issue but not a major one," says Tom McPhail, pensions research manager at Hargreaves. "Can it be that most investors aren't that interested?"

Most investors, frankly, don't know that they should be interested. In fact, charges are the one thing that investors should be able to control. But control is impossible if there is no transparency.

How can investors get a true picture when the funds industry often hides the total expense ratio (TER) – the best, albeit flawed, measure of the total cost of investing in a fund – deep in the fund's supporting literature rather than placing it up front on the fund factsheet? Some funds only disclose the annual management charge, which is only part of the total fund charge. This is deeply frustrating.

However, comparing costs doesn't stop at the fund factsheet. Making a like-for-like comparison when purchasing funds on different fund platforms is also tremendously difficult and time consuming.

Research by InvestorBee found that consumers could be paying more than double the best available fee for a fund investment if they don't shop around. InvestorBee compared four identical investments on eight of the UK's leading platforms (Fidelity FundsNetwork, Selftrade, TDWaterhouse, Alliance Trust, Bestinvest Select, Hargreaves Lansdown, Barclays Stockbrokers, The Share Centre). They discovered that the total fee for buying the same investment can vary by almost double (83 per cent) depending on the platform you choose.

So you still have to do your homework on charges. Maybe it is time to sign up to that campaign.

READ MORE...

View our IC fund tips.

Visit the funds and ETFs page for fund profiles, interviews with fund managers and the latest fund news.

visible-status-Public story-url-SmartMoney_FundFeesCampaign_020412.xml

By Moira O'Neill,
04 April 2012

Print this article

Moira O'Neill

Moira O'Neill is the Harold Wincott Personal Finance Journalist of the Year for 2012. She has been a finance journalist for 16 years and joined Investors Chronicle in 2008 where she leads the funds and personal finance coverage.

IC columnists

Simon Thompson

Simon Thompson

Winning stock and trading ideas from the creator of the Bargain Portfolio

The Trader

The Trader

Technical analysis and market calls from our in-house charting expert

Mr Bearbull

Mr Bearbull

Sound advice on running portfolios from an experienced commentator

Smart Money

Smart Money

Practical advice to help you plan your future

Chris Dillow

Chris Dillow

Incisive economic commentary plus thoughts on investor behaviour

Property Matters

Property Matters

Comment on the ups and downs of property investments, with a particular focus on the perennially popular world of buy to let

The Editor

The Editor

Commentary on markets, world affairs and everything to do with investing

Chronic Investor Blog

Chronic Investor Blog

Our light-hearted take on the world of investing

Advertiser reports

Register today and get...

Register today and get...
Please note terms & conditions apply