Fund managers and IFAs are backing calls by research agency Fitzrovia International to increase the transparency of charges in the retail fund industry.
Fitzrovia says additional char ges which are not fully disclosed amount to £185m a year across the industry.
These additional charges cover non-management-related fixed costs paid to third-party service providers such as expenses relating to trustees and auditors.
Fitzrovia says its research indicates if fund firms cut annual charges for third-party servicing costs by just 0.01 per cent, the costs saved would be around £17m each year.
Threadneedle Investments says it openly discloses all charges in its total expense ratios, which are included in the key features documents.
Director of communications Richard Eats says: “Although we disclose all charges, I do agree with Fitzrovia that disclosure costs could be made clearer to clients. The US method of disclosure on a simple cash basis rather than the current method of reduction-in-yield calculations could be used.”
Hargreaves Lansdown inv estment director Stuart Lou den says: “Although additional charges are generally not disclosed up front in the annual management charge, they are included in the projected returns to clients in the key features document.
“But improved clarification would not be a bad thing. We believe there is really no point in hiding additional charges as they are so small.”