Is transparency of fund costs a good thing?

Totton

The true cost of holding funds is now being exposed and is a little frightening. We are probably back to a cost level that we endured from the stockbroker before fund platforms came into our lives, certainly dealing and churning costs mounted up heavily and from what I remember were very similar to the amount of costs we face in the future. Makes me wonder if we were better off not knowing the true cost of those 'free' funds!

Archi_Bald

I think it was better as it was before.

Now we also have to pay the additional costs that firms have to manage their compliance with transparency.

dunstonh

Is transparency of fund costs a good thing?

Yes. It prevents platforms using the money from some people to cross subsidise others and make out they are providing services for free.

The true cost of holding funds is now being exposed and is a little frightening.

not really. Managed funds are typically comparable or cheaper. Its trackers that are suffering but that was always expected.

We are probably back to a cost level that we endured from the stockbroker before fund platforms came into our lives

Dont use a platform then. The regulator wanted to make sure that people realised that platforms come at a cost.

jimjames

I'm not sure that it really is worse than it was just more visible and I'm certain costs have come down.

When I first started out investing I was paying 5.5% initial charge and 1.75% AMC with no rebates. The IC is the worst thing as it takes that chunk out of your returns going forward.

Now we have no initial charge with fund supermarkets and annual fees around the 1.1% level even using the HL model so still an improvement on the pre-internet days.

pip895

Definitely a good thing - it is fairer and it looks as if it will have constraining effects on both platform and fund management charges.

bigadaj

It's got to be good thing but teh actual costs being paid are still opaque, the amc or even OCR, doesn't include many of the costs that teh fund a anger still manages to land on the clients.

Zebra

Personally I don't think the changes are a good thing, but obviously words like 'transparency', 'openness' and 'fairness' are loaded and that's why they are being bandied around.

The whole scenario reminds me of the changes to directory enquires where under the guise of openness and competition the authorities change things that don't need changing and in the end everybody is worse off.

Rollinghome

I'm sure there are people who believe that ignorance is bliss and as long as they cover their eyes and ears then the baddies won't get them. The reality is very different.

As JamesD points out in a post here it now emerges that Hargreaves Lansdown have been receiving up to a full 1.00% of the AMC we paid to the fund managers to manage our assets. This has allowed HL to relentlessly push funds that are most profitable to them regardless of the quality of the performance or suitability for their clients.

Had you asked HL until quite recently how much of your money they were taking from the funds you hold they would have declined to tell you, as they did when I asked.

The first step to exert downward pressure on prices is to know what is being paid. Until RDR it was impossible to know, as was the reason why companies such as HL were so keen for clients to buy certain investments.

The FCA has made clear that RDR is only the first step to ensuring that investors are fairly treated.

dunstonh

Personally I don't think the changes are a good thing, but obviously words like 'transparency', 'openness' and 'fairness' are loaded and that's why they are being bandied around.

So, you dont think that people paying less for what they have is a good thing?

This would suggest you are one of those that has got used to others paying your way. Why should they pay for you?

The whole scenario reminds me of the changes to directory enquires where under the guise of openness and competition the authorities change things that don't need changing and in the end everybody is worse off.

I dont see the comparison. Maybe if other people had been paying for your directory enquiries you would have a case but that was never the system that was in place.

Zebra

wrote:

This would suggest you are one of those that has got used to others paying your way. Why should they pay for you?

Wrong.

I pay my own way thank you.

j0nathon2

Nothing wrong with some transparency, but it just seems that things get more expensive - whether this is because A was subsidising B as suggested above, or because compliance and changes cost, or simply because it's an opportunity to restructure costs all at once and confuse people.

When HSBC announced their 0.39% fee it turned out that alone was more than I was paying in total previously for their own trackers, and the new clean class still had an AMC on top.

With H-L my Vantage holdings will definitely cost me more, the others it's impossible to say until they announce what the increased loyalty bonus will be on my existing holdings and/or the AMC on the clean equivalents. And where did the account closure fees come from!