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How to avoid excessive investment management fees

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Investment regulators on alert over excessive management fees.
Investment regulators on alert over excessive management fees.

Fund managers accused of over-charging investors

It’s really hard at the moment to find good investment schemes and fund managers to provide a decent return on the hard-earned cash you have invested with them. It’s even worse when you find out how much they have taken off the top in fees and charges. The costs of running a fund are comparatively low. Many fund managers make massive profits from the few percentage points they charge every year, simply because of the size of funds under their control. The cumulative effect over many years will be a significant reduction in the value of your investment.

Brokers campaigning for investors

The good news is that some brokers and regulators are starting to put pressure on the financial services industry to scale back their charges.

SCM Direct founder Gina Miller has been at the forefront of the campaign for a long time. She is now calling on the Financial Conduct Authority to investigate excessive administration charges. She says that fund managers are failing to treat their customers fairly. Funds have a fiduciary duty to pass on economies of scale to their investors. The FCA has teeth, and since the banking crisis has been willing to use them, but the wheels turn slowly and investors should not expect any regulatory action in the near future.

Mrs Miller is no stranger to the campaign trail. She spearheaded the campaign for a Parliamentary vote before the government could trigger Article 50 to take Britain out of the Common Market. She succeeded in the Supreme Court in January.  Let’s hope she’s equally succesful in championing investor rights.

Candid Financial Advice , a low-cost independent financial adviser, has stopped recommending M & G and Jupiter funds to its investment clients because of  excessive administration fees. M & G charges its clients over £34 million annually, which is five times as much as the Newton Real Return fund. Jupiter European fund charges four times as much as Newton’s Global Income fund.  In contrast Neil Woodford’s Equity Income fund absorbs all its administration costs within an annual management fee.

Act now to protect your investment income

In the meantime investors should carefully consider all annual fees and administration charges they will have to pay before entrusting their savings to any investment fund.  These fees may appear to be only a small percentage when you first invest, but they all add up and can seriously erode investment returns in the long run.

Disclaimer

The materials appearing on this website do not constitute financial or professional advice and are provided for general information purposes only. Visitors should always seek advice from a suitably qualified practitioner before taking any follow-up action.

 

 

 

 

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