- New MiFID II directive is designed to make investment fees more transparent
- We believe complex fee structures should be banned
- One all-in charge would enable investors to easier compare fees across the market
2018 brings the introduction of ‘MiFID II’, an EU directive which includes plans to make investment fees more transparent and easier for investors to understand.
Granted, few people get excited about new legislation and especially those working in finance and investment. But, as you know, we have always championed transparency in the financial industry and we’re excited about what MiFID II means for our investors and for the industry in general.
What is MiFID II?
One of the requirements of the new directive is the full disclosure of what are called ‘transaction costs’.
Historically these costs, which include the cost of buying and selling shares and taxes, were not required to be disclosed by fund managers. Investors have always been charged them, but it was just impossible to find out exactly how much they are.
One of the simple premises of the changes is that before a person decides to invest their money, they know exactly what the investment will cost them. This is designed to stamp-out these hidden charges, which are lurking somewhere in several pages of small print and which investors aren’t often aware of until they see them eating into their returns.
If you’re an existing investor with an investment agreement already in place, the new directive means that financial institutions don’t have to disclose the same level of detail to you i.e. a complete list of charges that you’re paying, until next year.
However, that doesn’t mean investors should refrain from asking their wealth and fund managers for a full breakdown of what they’re paying and when. The directive is there to ensure financial organisations share granular detail about investment charges with investors.
Our views on making charges simpler
One of the main objectives of evestor when we launched was to not only make financial advice accessible and affordable to everyone, but also to improve areas such as charge transparency and cut the use of jargon for customers.
We think we’ve made great strides towards achieving these points and are constantly looking at how we keep things straight-forward.
In this vein, here’s a really clear outline of the total costs of our portfolios, including the transaction costs of our underlying fund managers, so that you know how much you are paying for our advice and management.
The table below shows the old and new costs of our portfolios, which now take into account the transaction costs following Mifid II.
|Old total annual cost||New total annual costs|
We want to reiterate that while your annual fee may have risen, our management fees are not going up and you will not be charged any more than you have been charged previously on your investment. All that’s changed, is that we can now show you the transactions costs you incur upfront, rather than them being shrouded in mystery!
Better still, before we invest your money, we’ll tell you in pounds and pence exactly what you’ll pay on your investment.
We’re proud to charge one all-in investment fee. We believe this model makes it easier for investors to quickly work-out what they are paying and along with regulated advice, enables them to make the right decisions about their investments.
We’d like to see the regulator, the FCA, completely outlaw complex fees structures and replace them with one simple all-in charge. As well as making things clearer for investors, this approach would help build confidence that an industry renowned for its complexity, is actually making positive changes that finally favour customers.
The industry should be making it easier for customers to understand what they are paying. Having multiple charges being shown on multiple documents will not achieve this and still provides places for hidden or unjustifiable charges.
Furthermore, one simple all-in fee would be easier for the FCA to regulate, and better still, consumers will be able to compare charges across the market to make sure they are getting the best deal - like they do in almost every other area they spend money.