Funds - bundled to clean. TER?

whats

Hi,

Letter from Fidelity arrived today detailing my bundled funds will be converted to clean funds. Bit of a wake up call for me to transfer the funds from Fidelity.

Just been comparing costs between Cavendish 0.25% and AjBell 0.2% (additional charges to sell).

What has confused me is Total Expense Ratio (TER) & Fund Ongoing Charge (FOC).

Today I have bundled ‘Fidelity American Fund A-Acc’ which has a TER of 1.7%

The clean version ‘Fidelity American Fund W-Acc’ on Cavendish / Aj a AMC of 0.75%.
Cavendish has a TER of 0.95% & Aj lists a FOC of 0.94%.

Question time:
What charges do TER / FOC include?
Does TER = FOC?
Is the platform charge/ service fee at Aj 0.01% or 0.05% cheaper then Cavendish?
Will the clean fund be 0.7% cheaper at Cavendish (1.7 - .75 - .25) – or there are some other fees that need including?

I note if a fund is valued at £2k and I saved 0.05% at Aj. If the fund value remained at £2k it would take 5 years to save £5. Aj charges £4.95 charge to sell funds.



Cheers.

masonic

As you have deduced, it is usually quite beneficial to go with a platform that does not charge for dealing funds if you don't have a lot invested (assuming the difference in % fee is not significant), but for those with larger amounts, paying a £5 charge here and there has much less impact and saving a few basis points in the % fee can outweigh it.

TER and OCF are not exactly the same. OCF is supposed to be an improved measure of the total costs, but still does not include everything. Both of those figures are determined using past expense data and can vary over time. What you actually end up paying can differ. You can assume that if you are buying exactly the same class of fund (and there is no special rebate being advertised at one of the platforms), then you will pay the same fund charges, so you can simply compare the platform charges going forward.

Regarding the bundled fund you held at Fidelity, you might have been receiving a rebate of a portion of that higher ongoing charge (in fact, you certainly would have done recently).

whats

Great, thanks for confirming. I’ll likely go with the cheaper platform. First I need to see how the funds compare across the sector.

It’s not at all clear with Fidelity what I have. The last transaction on the above fund was 2009 (Dividend reinvestment). What I do know is I would have compared the likes of HL etc and not just signed up direct with Fidelity if they provided worse costs.

Anyway I’m not so concerned about the past, times to put things in better order.