The scandal of hidden charges

EdInvestor

It's way overdue that the real figures were revealed.

Then investors would understand why they don't seem to be making as much money as they expected. :mad:

http://www.ftadviser.com/FTAdviser/Investments/Products/OeicAndUni[quotetTrust/News/article/20091012/5c265946-b719-11de-9bbb-00144f2af8e8/Investors-paying-nearly-6bn-in-hidden-charges.jsp

The Total Expense Ratio of an average UK All Companies unit trust/Oeic is around 1.6 per cent, however SCM Private said that if you include all charges, including front end charges but excluding dealing costs, the annual cost of a typical fund in this category can be as much as 2.8 per cent a year even when one invests for a five-year period.In addition a typical fund manager will turn over around 57 per cent of their portfolio each year, which adds various costs amounting to a further 1 per cent a year, taking the true cost of investment to up to 3.8 per cent a year over a five-year period.

People are paying more than double what they are told in secret charges.Almost half their profit is going to the financial services industry


Isn't it obvious why there is a pensions crisis?

dunstonh

Isn't it obvious why there is a pensions crisis?

No. Please do explain how you manage to link that article to a pensions crisis?

EdInvestor

If private pension funds were doubled in size - or even 50% higher than they are now,, would there be a crisis?.I think not.

You will also be aware that in the Turner report, the high hidden charges were identified as a major fundamental reason for the pension crisis in 2005.Nothing has changed.

purch

In addition a typical fund manager will turn over around 57 per cent of their portfolio each year, which adds various costs amounting to a further 1 per cent a year

Whatever a Fund Manager does or doesn't do, is reflected in the overall results isn't it ??

If a Manager outperforms his/her Index by 4%, it's no good whinging that it could have been 5% if the Manager had lower "various costs", cos without the Manager making his/her qualified decisions there would'nt be any over/under performance in the first place.

You choose a 'Managed' Fund to outperform the market, and there is no chance of any outperformance without the Manager doing something.

EdInvestor

purch wrote: »

You choose a 'Managed' Fund to outperform the market, and there is no chance of any outperformance without the Manager doing something.

That's not so, is it.The index will change over the year, so if the manager chooses to do nothing he could outperform.

But my point is not whether these these charges are justified or not, but that they are kept secret.

Investors are not told about them.They are misled into thinking they are only paying the TER.

I think this is wrong.Do you agree?

jamesd

I think it's wrong for you to ignore all the charts and performance tables that show performance after all charges and costs, which are made readily available to any investor who cares to look and which are used in all tables that compare different funds.

Pick the option that has the best performance after all costs and ignore the costs. You're paying for that better performance and so long as it's delivered you have reason to be happy.

purch

I think this is wrong.Do you agree?

I think it's wrong if there are other fixed costs that are not included or shown as part of the TER.

I think dealing costs will be what they will be, and I don't see any benefit if after the fact they are revealed.

If a Fund Management Company wanted to cap dealing charges at say 0.5% of Fund Value and include this as part of the AMC, then fine, but it would surely impact potential return if they did so.

kennyboy66_2

What percentage of fund managers outperform their index over say a period of 5 or 10 years ?

purch

Probably a very small %

Richard_DandR

Dealing charges are disclosed in the annual report of an ICVC/unit trust.

See page 21 of linked BlackRock accounts

http://www.fundslibrary.co.uk/fundslibrary.dataretrieval/Documents.aspx?sedol=0585239&type=packet_fund_doc_reports_and_accounts&user=hl_web_test

Not sure how EdInvestor expects a fund manager to manage a portfolio without incurring dealing costs and stamp duty. Even tracker funds will suffer these costs.

sabretoothtigger

Best to use trackers alot of the time Shares in the west just havent performed so great maybe because the economys arent growing like they did in the 80's and 90's

Stamp duty isnt payable because its paid by the funds themselves, that is part of their costs. There is management fee but better to look at TER or total expense ratio which includes cost of dealing as well