The fees and charges applied to funds, and more specifically those held in discretionary services, can be incredibly confusing. This makes it difficult to compare options, and tell whether you’re paying over the odds.
It doesn’t help that many investment managers speak in acronyms rather than plain English – and it’s hard to understand what your OCF (Ongoing Charges Figure) is when you’re still Googling AMC (Annual Management Charge).
At Seven Investment Management or 7IM, we don’t feel the need to complicate matters and pull the wool over your eyes, because we’re confident that we’re charging you a competitive rate to manage your hard-earned money.
However – because we always like to be on the front foot – we’d like to take a minute to answer some of the questions you might ask when choosing an investment manager:
Q. As a Discretionary Client how will I be charged?
A. At 7IM, we apply two charges:
- Discretionary Service Charge excluding VAT – This covers the annual ongoing costs of running your discretionary portfolio – so our time spent keeping an expert eye on your money. We like to pass economies of scale onto our investors, so the percentage service fee you pay decreases the more you invest with us.
For example, if you place £250,000 in a blended portfolio (such as 80% 7IM MM Balanced fund and 20% 7IM AAP Balanced fund), under full discretionary fund management (DFM), we currently charge 0.25%, approximately £625 in year one*.
- Ongoing Charges Figure (OCF) – This includes the AMC, as well as other additional costs, such as trustee and auditor fees, that are taken directly out of the fund. If we again take the example of £250,000 in the same blended portfolio under DFM, this charge currently would be 1.21% or £3,015.
So, in summary, based on information as at 21/03/2017 you could pay a total of £3,640 for year one if you invested £250,000*.
Q. Why does my Discretionary Service Charge decrease as the amount I invest goes up?
A. Because we’re not greedy. We understand that to grow our business, we need to keep our fee structure competitive. Some fund charges are standard percentages, so our fee will go up with your investment. We reduce our service charge to offset these fees, so that you remain a happy customer, and we can pass economies of scale onto more investors*.
*Please note this sum is indicative and will be charged as a percentage of your assets - therefore these will fluctuate with your portfolio size, rising if your portfolio rises in value.
Q. Why is 7IM different?
A. Countless reasons. But above all – when you invest with us, you invest in sound common sense. And this applies as much to how we run our business, as to how we treat your investment. You’re not going to keep your money with us if you feel cheated. That’s why we are obsessive about transparency. We want you to feel like you’re paying a reasonable amount for a high quality, predictable and personalised service. Because that’s what we strive to provide.
So what is the one critical takeaway here? Clarity is key.
As a discretionary client there are two standard charges applied to our investment management services. Before enlisting a manager, it’s important to understand what these are and how they’ll impact your returns in the short and longer term. And if that information isn’t readily available, just ask us.
Justin Urquhart Stewart
Co-founder and Head of Corporate Development
You should make sure that you understand the risks of investing which include the risk that your investment can fall in value and that you may get back less than you originally invested.
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