Confused by New Investment Charge Rules?

The EU has now brought it's new MIFID II rules in to force, meaning that fund managers now have to comply with a higher level of transparency than ever before when disclosing fees and charges.

The trading costs of the fund must now be included, which many fund managers had not previously disclosed. The previous system was focused on providing investors with an ongoing charges figure, that while not accurate, may have been easier for investors to understand. The issue with the previous system was that many fund managers did not include trading or fund administration costs in this figure.

The issue with the new rules is, that Britain's investment industry has not decided on one methodology for calculating the extra costs that must now be disclosed, resulting in fund managers choosing a method that suits them the best. This deprives the new scheme of uniformity, increasing the level of confusion for investors attempting to compare "like for like".

To show a specific example, FTSE All Share tracker funds have transaction cost figures ranging from -0.45% to 0.33% (Laura Suter, Telegraph, January 2018).

How can negative fees exist? This is due to share price movements in between the decision to sell a stock and the actual sale itself.

Due to the rush to comply with the new regulations, many fund managers have published figures for each fund in non user friendly ways.

Andy Agathangelou, chair of the Transparency Task Force,  said: “Now is the time for the Investment Association to take action and admit it has been completely wrong about hidden fees for a long, long time."

According to Sean Hagerty of Vanguard the new regulations do not give investors a “simple and meaningful disclosure of investment costs”.

The Investment Association has responded to the criticisms and is working on a new cost disclosure template.

Westminster Wealth Management can assist in helping you to navigate your financial future, and expert advice is valuable in complicated times just as much as in simple ones. Contact us today.

The value of investments and income from them may go down as well as up and you may not get back the original amount invested.