Investors now value transparency of fees above all other factors when choosing who to manage their money – an attribute that has helped to shape Netwealth since we launched our wealth management service two years ago.
A new survey on investor preferences and habits – conducted by YouGov on behalf of Netwealth – found that 72% of respondents want to know exactly how much and when they are being charged.
Trust is the next most important attribute for investors when choosing a wealth manager, with 67% rating personal trust in their wealth manager as key. Investment performance comes in third with 60%.
Source: YouGov 2018
The findings reflect a noticeable shift in attitudes towards the wealth and asset management industries. Previously, it may have been difficult for investors to find out exactly how much they were being charged each year to invest.
Today, regulatory changes and the fast-evolving technology of new entrants to the market is raising investors’ awareness of how much they are paying in fees and the impact those charges can have on their long-term savings.
How a lack of transparency adds up
This lack of transparency can be very costly. Even a 1% difference in fees can have a considerable effect on the value of portfolios over time – a potential shortfall that has also been highlighted recently by the UK’s Financial Conduct Authority (FCA).1
They stated: “Given that even small differences in charges can have a significant impact on people’s savings over time, the harm is significant.”
This is no understatement. On a £500,000 medium risk portfolio investors paying 1% more in fees could experience an £80,000 shortfall over 10 years, and receive £240,000 less capital growth after 20 years.2
While there have been some advances in transparency in the wealth management industry, it is still notable that 50% of all respondents to the survey do not know about all the fees they pay for investment and advisory services.
Please remember that when investing your capital is at risk.
1Quote taken from the FCA Business Plan 2018/19
2Source: Numis Securities, Citywire, Netwealth. Based on forward looking expected return for our medium risk portfolio (level 4) of 5.3%, gross of fees, and assuming all-in charges of 1.82% for a traditional wealth manager and 0.7% for Netwealth.
All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 1,014 adults, of which 798 had £50k+ in investable assets, and were defined as an ‘investor’. Fieldwork was undertaken between 24th - 27th May 2018. The survey was carried out online.