The mifid OCF ex-ante is 0.25%
The mifid transaction costs ex-ante is -0.34%
Obviously, the client isn't being paid 0.09% to own the fund.
How do you position this in your suitability report? (this is a real example)
I would ignore the negative transaction costs and probably just go with 0.25% to be on the safe side to be honest.
Yeah that is what I ended up doing. Well, I didn't ignore them. Problem is there was another fund with transaction costs that weren't negative. And this creates an issue because obviously that figure on that fund is also exposed to the same calculation flaw as the one above, just without creating a negative.
This happens rarely, but I did sit and think about it for a while. And I didn't reach a conclusion that didn't come with a large, complicated explanation.