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Vanguard calls for clearer cost disclosure

Vanguard head of retail Peter Robertson has called for a clearer relationship between turnover and cost to help tighten up total expense ratios. 

His comments follows those of former New Star chief investment officer Alan Miller who criticised “hidden charges” imposed by fund managers.

Miller said the TER measure should be replaced with a new calculation that includes all the costs of running a fund.

Robertson says the ‘T’ in TER is a total misnomer because transaction costs, including tax are so high that what investors actually pay can be very different to the TER.

He says: “Making clear the relationship between turnover and cost would not only tighten up TERs but might enable investors to save some tax. We believe that AMC should be relegated to the small print and providers only advertise TERs, which should, ideally, be the real price paid by customers.  We also believe that PTR should be refined to reflect manager driven turnover and thereby enable the calculation of an annual cost to the investor.

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