Answered by Lee Goggin
We only ever work with wealth managers which are committed to transparent, better-value fees, and generally the industry has been working hard to become much more client-friendly on this front in recent years.
The changes you’ve been reading about are part of the EU’s second Markets in Financial Instruments Directive, a package of reforms aimed at improving competition and investor protection.
Investment managers now have to provide clients (at least annually) with a detailed summary of the assets held with them and all costs and charges associated with maintaining the portfolio. They must also spell out in detail the impact these costs have on performance.
Firms also now have to provide quarterly performance reports on all the assets held on their behalf (previously this would have been annually) and alert clients if the overall value of their portfolio depreciates by 10% (as evaluated at the end of each reporting period).
I predict that many clients of the less transparent providers might be in for a bit of a shock once they fully appreciate the charges they have been paying. It may be that some “cheap” providers are shown up as anything but.
Wealth management fees can be slightly complex by necessity as there are costs associated with custody, trading, nominee accounts and so on. Greater cost transparency will help investors appreciate all this “plumbing”, as well as to evaluate performance against costs more meaningfully. Net gains should always be your focus, which is why the firms we work with offer Total Expense Ratios to give prospective clients a thoroughgoing understanding of how much they will pay “all in”.
Our guide, What to Expect from Wealth Management Fees, provides a good introduction, while 10 Wealth Management Fees You Probably Haven’t Heard Of will help those getting more granular as they weigh up providers.
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