Readers of my regular commentary on all things financial will be very familiar with my muttering about the media and my frustrations about their tendency to hype up everything through hyperbole, particularly the case for the headlines.
It’s not at all a surprise that they do so – they are after all in the business of selling newspapers – but it still often rubs me up the wrong way. Unfortunately they are never going to engage in just telling us the facts and letting us form our own opinion, although I can still hope…
However, some recent headlines in the financial pages have actually held some good news for investors for a change, with some of our peers re-evaluating the annual fees for their fund ranges. While many have been quick to point out that these changes come as a response to pressure from our regulator, the Financial Conduct Authority, it’s still welcome news.
And I can happily comment given 7IM’s own history of reducing our fund fees, which we have done a number of times as and when the investment management costs have reduced to allow us to do so. So nine years ago, when we originally launched our Asset Allocated Passive (AAP) funds, investors in the adventurous risk profile would have paid 0.83%. Now an investor pays 0.68%. That’s a discount of over 20% that we’ve returned to our clients. We constantly check that our fees are fair and see if we can reduce them further without damaging our business.
It’s also why our fees vary across our funds. Yes, we recognise that it would be easier to have one fee for all our funds, but the reality is that the costs for each of our funds vary and we believe that people should pay for what they’re buying.
Ultimately, what is most important for us is that we deliver value for money.
This principle applies to our fund fees and our service fees. So, this means that we also don’t charge a lot of other fees that would typically be levied by many a peer. For example, we don’t charge for investment transactions, the safe custody of fund assets, tax vouchers and capital gains tax reports. Exit fees are also not due. And if you’re starting to think that you should get around to investing more of your ISA allowance of £20,000, we won’t charge you for that ISA wrapper either.
We also recently took the decision not to charge investors for the research-specific fees that will become due next year with the introduction of the second Markets in Financial Instruments Directive. This new piece of regulation is trying to make things better for investors as previously fees for research were often bundled with transaction fees by the providers.
So my advice is to make sure you look beyond the headline fees. Going for the cheapest often isn’t the best option. It could mean that you choose an investment that actually doesn’t meet your financial needs. It could also mean that you inadvertently choose a firm that does charge extra for everything else you might need e.g. to help file your taxes. That’s just false economy rather than common sense.
Justin Urquhart Stewart
Co Founder and Head of Corporate Development
Seven Investment Management LLP is authorised and regulated by the Financial Conduct Authority. Member of the London Stock Exchange. Registered office: 55 Bishopsgate, London EC2N 3AS. Registered in England and Wales No. OC378740.
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