Investment Fees & Charges

Investment Fees & Charges – This week I would like to focus on what it seems most clients are concerned about, that is investment charges.

On the Money Facts web site is a section entitled “ How Fees Stop Your Money Growing”, it later describes how John & Jo invest £10,000 each, and how John only nets £20,696 over 20 years and Jo nets £24,014, as her fees were less.

To add to this simplistic nonsense, the site goes onto to say that John’s only hope is that his funds are only charging higher fees “because they are confident that they will perform above average”.

This sort of irritating nonsense is being peddled quite widely by a number of web sites and of course by many journalists.

Fund managers do not charge higher fees because of their “confidence” (what utter nonsense)  but for commercial reasons. Some of the top performing funds have the highest fees because they have to pay substantial sums to their star managers.

There are many factors that affect investment returns but if you are only concerned about charges, then you should find a low cost fund platform and make a selection of passive or index trackers – and leave your financial future to the dictates of the investment market.

This overt focus on charges is in my opinion quite damaging, particularly when it is perceived as the be all and end all – of investment planning.

Investment Planning is a sophisticated process, the founding father of Investment Planning – Harry Markowitz, won a Nobel Prize for Economics in 1952 for his paper “Portfolio Selection”. This paper provided the basis for the investment planning used today.

The primary focus of the paper was how to combine different investments in order to provide the most efficient combination for Risk and Reward.

Today we call this process Asset Allocation, the asset allocation process has the potential to provide up to 80% of the overall portfolio return (some say 87%).

If you want a comparison, it’s the Elephant of Asset Allocation that is mainly responsible for driving the returns of the portfolio and the Mouse of Investment Fund Charges does affect returns but not in the manner suggested by many writers of limited intellect.

To see how Asset Allocation can work we will shortly publish how one of our “Brexit” portfolios has performed as compared to the FTSE 100.

To see how proper Asset Allocation can work for your investment or pensions, please read our guide to Investing, or contact us.



Ray Best is a resilient Financial Planner with a unique approach to investment planning, his work ethic has propelled him from humble beginnings to be voted as a top UK Financial Planner by Vouched For (as published in the Sunday Times). These days he works with families with large investment portfolios or big inheritance tax liabilities, the first step, is to book a Discovery Meeting HERE.

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