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Tracker funds could look 20% more expensive under ‘all-in fee’

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Index tracker charges could appear over 20 per cent higher if the FCA’s “all-in fee” proposal is implemented, according to fund researchers Fitz Partners.

The FCA’s interim report on the fund industry published last month proposed introducing a new metric that would force disclosure of transaction costs in a fund’s total costs.

Speaking to Money Marketing, Fitz says the impact of including transaction fees on index trackers would be less than on active fund charges but would still result in an increase of 21 per cent on costs currently disclosed in ongoing charge figures.

The increase would be 25 per cent for active funds.

While platform charges are excluded from the FCA’s proposed metric, Fitz Partners chief executive Hugues Gillibert says it is interesting to keep those in mind since the “entry” or “subscription” fees described by the FCA have mostly disappeared when investing through platforms.

Gillibert says: “I believe that platform and advisers’ fees stay the same whether you would invest into an active fund or passive. In proportion that cost for just having the right to invest and keep your investment is pretty substantial compared to the cost of actually managing the fund itself.”

(Hargreaves Lansdown platform cost used as an estimate)
Source: Fitz Partners Ltd

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Comments

There are 2 comments at the moment, we would love to hear your opinion too.

  1. Wow, so that’s an extra 1.2p per £1000 on a Vanguard FTSE 100 . According to Vanguard AMC and OCF at 0.06%, TER not shown so perhaps another 2p?

  2. AFAIK Vanguard do not differentiate OCF and TER. They also publish all of their brokerage costs in an “enhanced disclosure” document that you can find with a quick Google.

    This article is at best misinformed and at worst deliberately misleading. The real story is that HL are expensive, and that apparently active fund managers incur significant extra cost in brokerage fees.

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