Answered by Lee Goggin
You are certainly right to want to get a firm handle on all the fees and charges that might apply. Understanding them is an essential part of comparing providers properly and will enable you to see more clearly where the best value is on offer.
Wealth managers’ fees can seem somewhat complex, but this is simply because there are many moving parts within the services they provide and firms work in slightly different ways. But you should never feel bamboozled! Good wealth managers like the ones we work with are committed to being totally transparent on costs – and it is also a regulatory responsibility. If you don’t understand anything, ask for an explanation. If answers are unforthcoming: avoid!
Wealth managers usually charge an annual management fee for running your investment portfolio, which at better-value firms will be in the region of 1-1.5% of the assets in question. This is very much a “headline” fee, however, since there are several other costs involved in constructing and managing a portfolio. These are include: underlying investment costs, such as for buying third-party funds; taxes like VAT on the management charge; custody costs for keeping your assets safe; and brokerage and transaction fees.
The figure you really need to pay attention to, therefore, is the Total Expense Ratio – an estimate of what all costs will amount to annually. Compare this to the investment performance being held out as net gains should be your focus.
Most of our users also require at least some financial planning advice. This may be baked into an annual fee, charged for separately or just be a one-off cost if, for example, you are consolidating several pensions. A good wealth manager will seek to be competitive in every element of your service package.
Two things you need to be hyper-vigilant about are entry and exit fees. A few firms charge hefty upfront fees when entering their investment programmes and/or charges to take your money out, effectively locking it in for several years. These are just one element of the hidden fees we’ve been helping our users avoid.
Our guide, What to expect from wealth manager fees sets out in detail all the costs you should ask potential providers about so there are no surprises and you can ensure you get the best possible deal.
Anonymous, 30, Business Owner | Asked on Jan, 30
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