Last weekend, the Daily Telegraph reported that over £7 billion a year is being skimmed off the value of investors savings through hidden fees and charges.
Unfortunately, the money is being taken legally and investors cannot claim it back, however there are things you can and should do to reduce the amount you pay in charges:
Use a discount broker
When investing in unit trusts or OEICs, there is no reason to pay an initial commission. Plenty of brokers now discount the initial charge which can be up to 5%. It is actually cheaper to use a discount broker than go directly to the fund manager. This is because fund management companies would prefer to spend their time and resources on running the fund, leaving the administration, client relationship management and advice to others with the relevant expertise. Bestinvest discount initial charges on all of our rated funds to zero
Check your monthly Direct Debits
Too many people have old direct debits going into managed funds and may not realise they are paying an initial commission. List all of your direct debits and check with the fund management group on what fees you are paying. If you identify funds which have a commission attached, call our Investment Professionals to see if Bestinvest can save you money.
Avoid performance charges
There has been a recent trend of new funds being launched where performance charges have been added to the Annual Management Charge. This means that if the manager does a good job they get an extra bonus. We do not believe these charges align the manager’s interest’s with the investor and only very rarely are they justified.
Don’t cut costs for the sake of it
As with most things, you get what you pay for in the world of investments, but looking for the cheapest broker may end up being a false economy. Yes you save money, but do you have access to the best research, advice and support. There is more to investment than just getting the best price. Even legendary investors, such as Warren Buffett, don’t get the cheapest price, but he does have the best research. Make sure you balance cost with service.
Make sure your adviser is truly independent
The majority of Independent Financial Advisers take their responsibilities seriously and want to do what is right by their clients. However, there are sadly always a few bad apples. Make sure your adviser isn’t tied to one product over another, because of higher charges or is just shamelessly promoting a new fund launch to increase assets under management. We pride ourselves on the Independence of the advice we give.
If there is anything you wish to discuss please call one of our Investment Professionals on 020 7189 9999.