Make Investment Charges Clearer

Make Investment Charges Clearer.

The Financial Conduct Authority (FCA) is applying yet more pressure on investment and pension companies to be clearer with their charges.

In its latest review, the FCA has suggested that investment funds should drop the use of the annual management charge (AMC) in favour of a broader Ongoing Charges Figure (OCF) to include all costs levied both directly and indirectly by a pension, insurance or investment company on its clients investments.

What is all the fuss about on lowering charges?

Many clients with have policies where there are charges such as

• Allocation Rate
• Initial Charge
• Bid Offer Spread
• Policy Fee
• Exit Penalties
• Initial Unit Charges
• Accumulation Unit Charges
• Annual Management Charges

In addition, there will be other stealth charges such as marketing costs, stamp duty etc that may be deducted from fund performance before the real unit/share price for your investment fund is known.

Not all investments, but some will have a range of all the above. This makes it nigh of impossible, without the help of a professional adviser for the consumer to compare charges and performance for an investment.

The FCA is continually applying pressure to the finance industry to be much clearer with charges, many are now adopting “clean share class” programmes and the FCA still wants more providers to move to greater transparency and adopt an Ongoing Charges Figure (OCF) to be published.

Comment

We agree with the FCA. We have for many years said that charges are the biggest hit on any client’s investment growth prospects. We have sophisticated tools and our own inhouse charge comparision calculators to help us work out who are the cheapest providers and who are not.

In the past, the regulator moved to force providers to use “own charge” quotations but we suggest this is still abused by many selecting default funds in their quotations that have the lowest charge to make them appear more competitive. Any move by the FCA to improve transparency and drive down charges is welcome.