Netwealth has developed the Portfolio Cost Calculator to help people estimate what they are paying and know what questions they should be asking their manager.
Currently, wealth managers often charge separately for all or some of the services such as annual management charge (AMC), VAT (if not included in AMC), custody and platform charges or tax reporting.
Many traditional wealth managers quote a single management fee which may include the cost of advice, without including other charges such as VAT, trading costs and the underlying fund fees.
Netwealth claims this makes it difficult for clients to understand what the return is, after calculating the costs, which is what they ultimately receive.
Its own calculator quotes an all-in fee for the investor. The only costs not included are those of the underlying tracker funds.
FCA market study
The calculator launch comes after the FCA’s Asset Management Market Study, published earlier this year, confirmed it will introduce a single ‘all in’ fee structure for funds, claiming it would aid simplicity and clarity for retail investors.
From next year investors will pay a single charge and fund managers will be expected to provide an estimate of the total costs likely over that year. After 12 months, the investor will receive clear information of how much they actually paid.
Charlotte Ransom, CEO of Netwealth, said: “In its recent report on the asset management industry, the FCA noted that ‘investors’ awareness and focus on charges is mixed and often poor’.
“Transparency regarding the impact of fees on future investment returns is also highlighted as a priority in the Mifid II proposed regulations. Netwealth’s Portfolio Cost Calculator is designed to help address these important problems.”
Matt Conradi, senior client adviser at Netwealth, said: “Many clients of traditional wealth managers are sometimes either too trusting or too afraid to ask the important questions about how much they are paying for advice and to have their wealth managed.
“The headline fee they are quoted can often significantly underplay the overall costs.”
“Our calculator helps highlight all the items for which you might be charged. It estimates the cash amount you are paying every year in fees, based on how much there is in your portfolio, and the type of wealth management services and investments you have.
“We then encourage clients to ask their current provider to detail what their services cost in total each year.”
