Netwealth develops a Portfolio Cost Calculator to demystify fund costs

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Netwealth announced it has developed the Portfolio Cost Calculator , which is now available on its website and helps people to estimate what they are paying to have their wealth managed, as well as know what questions they should be asking their money manager.

Charlotte Ransom, CEO of Netwealth, said, “In its recent report on the Asset Management Industry, the Financial Conduct Authority 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.”

Wealth managers often charge separately for services such as Annual Management Charge (AMC), typically not including VAT, VAT (if not included in AMC) and custody and platform charges –  as well as underlying investment fund fees

On the other hand, 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.

This can make it difficult for clients to understand the range of returns, net of all costs, that they’ll ultimately receive.

Matt Conradi, senior client adviser at Netwealth, says, “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 Portfolio Cost 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.”

Netwealth said its Portfolio Cost Calculator asks five important questions to estimate the all-in fee: the value of an investor’s current portfolio, whether the portfolio is professionally managed or self-invested, whether the investor is receiving ongoing advice and financial planning. Whether the investor have an Independent Financial Adviser or receives advice from a portfolio manager; whether the portfolio is mainly invested in active or passive funds.

It then generates an estimate of what the investor is paying for the services received and compares them with Netwealth’s fees.

For example, an investor with a portfolio of £250,000, who has their portfolio with a wealth manager who also provides ongoing advice, and invests principally in actively managed funds, is likely to be paying an all-in fee of greater than 2.50 per cent per annum. By contrast, that same investor would pay an all-in fee, including advice, of 0.95 per cent at Netwealth – thereby saving over 1.5 per cent every year in fees.

Over a 10 year period, assuming an annual investment return of 5 per cent, that fee saving would result in the investor being better off by over £50,000, Netwealth estimates.

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