very highly remunerated fund management industry

gadgetmind

dunstonh wrote: »

it takes them around £3-4 billion to become profitable).

They might want to take a look at that!

dunstonh

gadgetmind wrote: »

They might want to take a look at that!

I'm sure they would love to. However, the problem is that when you are not getting the kick backs and higher levels of cross subsidy (larger investors get lower charges, so less to cross subsidise the small ones and the small ones dont get put on unbundled platforms much), then you need volume to be profitable.

The initial outlay has to be recovered and platforms are under constant software changes to keep up with the others. The long term game for wraps is for them to be able to a portal for your current accounts and savings accounts as well as everything they already do.

atush

le_loup wrote: »

I don't think it hurts to rail against high fees. We pay around 3 times as much as US mutual fund investors, so if they can do it, why can't we?
True, one can buy index funds but that will only return average amounts. You may well say that we therefor get benefit from paying a higher charge. True but why don't we get even more benefit by paying less.
For managed funds, there is no real competition ... well there is but it runs as a cartel. Look at how all the majors quietly increased their AMCs buy around 0.25% over the last few years. Bit like ALL the energy companies suddenly, in the same week, discovering that they can charge less!
No, I think it is worth nagging and nagging about this subject, otherwise we will get into the AMC PLUS PERFORMANCE FEE syndrome in no time.
Keep up the good work SallyG.

I agree that high fees are bad (and I don't pay them) but I do feel we can all vote with our feet and move to lower charges (which don't have to be simple trackers). If enough move out of high charging funds, the charges will lower.

gadgetmind

dunstonh wrote: »

The long term game for wraps is for them to be able to a portal for your current accounts and savings accounts as well as everything they already do.

I'd actively avoid such "portals" as I hate it when organisations get into "mission creep". I bank with my bank and buy fish from my fishmonger, and can honestly say that I don't want either to stray from their area of expertise.

The existing platform providers are either going to have to address their inefficiencies or someone lean and mean is going to come along and nick their dinner money.

Lokolo

atush wrote: »

I agree that high fees are bad (and I don't pay them) but I do feel we can all vote with our feet and move to lower charges (which don't have to be simple trackers). If enough move out of high charging funds, the charges will lower.

Exactly.

If people do not like the high fees they can move elsewhere. Just like every market, there are effects of supply and demand.

jamesd

SallyG wrote: »

What do IFAs know about these "high management fees" and how are they protecting their clients against them?

The job of an IFA isn't to minimise investment fees, it's to maximise likely investment returns for the client. That can easily involve using funds that have both higher costs and higher performance. It can involve using low cost funds like the BlackRock institutional series for some trackers as part of a mixture.

Don't get distracted by costs, performance matters more. Cost is something that tracker fans like to focus on because it's easy to compare and highly relevant for that type of investment. It's less relevant for actively managed funds where manager performance is the most important factor after investment sector.

I personally use a mixture of both active and passive funds, including in the passive side at least one Vanguard fund and at least one leveraged passive ETF.

SallyG

Just trying to figure out how it all works - thanks for all your enlightening comments
I keep reading worrisome things like this :
"On average an equity fund manager gets about 1.5 per cent of the sum invested. This pays for their services, which often include actively managing the fund's investments.
But on top is added an additional 0.3 per cent and trading costs of 1.4 per cent, the Treasury was told. These hidden charges have increased by 9 per cent in a decade and are getting worse. Foreign exchange fees, custody fees, and incentivised trading rebates that lead to 'churning' of investments were also highlighted by Mr Norman.
His criticisms were met with anger by the chief executive of the Investment Management Association, Richard Saunders. He described the accusations as 'irresponsible scaremongering' that discourages investing. He also questioned the accuracy of the figures, particularly the £67billion siphoned off in charges, which he says is nearer £11billion.
Trading costs are not 'hidden' because they're published in the fund accounts, he wrote in a blog. 'They represent the cost of investing, just as you or I would face if we invested our money directly. As such, the revenue does not go to the manager, but to brokers which are completely separate from the fund manager.'

http://www.thisismoney.co.uk/money/pensions/article-2077150/We-told-Treasury-reveal-shocking-pension-charges-despite-risk-insist-advisers.html#ixzz1jixwSt5R

I wish my pension company would automatically and as a courtesy specify/itemise/state destination of all payments out of my pension fund even if the overall picture is "published in the fund accounts"?

gadgetmind

jamesd wrote: »

I personally use a mixture of both active and passive funds, including in the passive side at least one Vanguard fund and at least one leveraged passive ETF.

I'm similar, but the relative sizes of my holdings is such that my overall weighted TER is 0.38%.

dunstonh

I keep reading worrisome things like this :
"On average an equity fund manager gets about 1.5 per cent of the sum invested. This pays for their services, which often include actively managing the fund's investments.
But on top is added an additional 0.3 per cent and trading costs of 1.4 per cent, the Treasury was told. These hidden charges have increased by 9 per cent in a decade and are getting worse. Foreign exchange fees, custody fees, and incentivised trading rebates that lead to 'churning' of investments were also highlighted by Mr Norman.

That is just plain wrong on a number of levels.

The fund manager doesnt get 1.5%. The fund may have a charge of 1.5% (lets say on average around 1.8% TER). However, they dont get to keep it. IFA gets 0.5%. Platform gets 0.25% to 0.8%. Costs take some of the rest and then the fund house gets whats left over. The fund manger is paid by the fund house.

I also seem to recall that the figure of £67 billion he used was easily rebuked as the figure was not theoretically possible based on earnings of the industry.

Also, the figure, whatever it is, is going to be high. You are talking about assets under management of £2.1trillion. The figures are not going to be small.

I wish my pension company would automatically and as a courtesy specify/itemise/state destination of all payments out of my pension fund even if the overall picture is "published in the fund accounts"?

They do in the published fund accounts.

SallyG

So this is just an admission of ignorance?
http://www.bloomberg.com/news/2012-01-16/u-k-lawmakers-call-for-pension-fund-managers-to-lower-charges.html

and this: http://www.theyworkforyou.com/whall/?id=2011-12-07a.107.1