Investment charges are becoming clearer

Anthony Morrow - CEO & Co-founder

May 31, 2019

If you’re investing or have a financial adviser who invests for you, you’ll be paying an annual fee on your investments. Who or how much you’re paying can often be difficult to decipher.

If you’re lucky enough to receive an annual statement from your provider showing how much you’re being charged, this is usually represented as a percentage and sometimes isn’t very clear as to how much you’re really paying.

But that’s all about to change due to MiFID II regulations.

What is MifID II?

MiFID II is the Markets in Financial Instruments Directive II – a new set of rules that affects certain financial service companies across the European Union.

It is intended to strengthen regulations already in place and make sure financial service providers are being transparent with their customers. One of the main changes the new directive brought about was the requirement for investment platforms and advisers’ to disclose exactly what they’ve chargedto their customers over the past year.

This will make it much easier for investors to see what they’ve been charged – and then be able to compare the cost of various platforms to see whether they can get a better deal.

How will my annual statement change?

Due to new regulations all investment platforms must send their customers a statement explaining the full cost of their investments over the last year.

This includes the platform fee, fund costs, advice fees and any other costs. But instead of it just being show as a percentage, customers will now be able to see what they’ve paid for their financial adviser and investment in pounds and pence.

Why is this important?

For many investors this will be the first time they have received a detailed breakdown in pounds and pence of all the fees they pay for their investment each year – and the total amount may come as a surprise to many.

There is always a cost to investing, but any charges you pay can have an impact on the size of your pot and the effect of fees over time can make a big difference in the long term.

Although the figure on the statement may come as a shock to some, this new transparency will help investors understand exactly how much they are paying and decide whether the service they are receiving is worth the overall price or if an alternative option may offer better value.

This doesn’t mean that the cheapest is always the best, but it is important that you feel you are getting value for the money you are spending.

If you’re happy with the money you spend on your adviser; perhaps you have complicated financial circumstances, or you have a great relationship with your adviser, then you needn’t worry.

But if you’re not happy, or you’re not sure, there are other options out there which could cost you much less and still provide you with a similar, great service.

At OpenMoney, we’re cutting the cost of advice by offering an online financial advice service, with the added comfort of telephone appointments with our advisers.

So, if you do get a nasty shock in the post over the next few weeks, don’t worry – there are options out there!

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