Fund Charges
LWheel2003
Member
When you disclose charges in your suitability report, do you include the fund transactional charges, or just the AMC. Sometimes when you put the TER it is a lot higher than just the AMC. I have always put in the TER, but my Adviser is challenging this, and asking why we can't just disclose the AMC. Would appreciate thoughts.
Comments
We have to disclose full charges, including transactional charges, at the firm I'm with. Some providers don't give them, but most do and if available they need to be disclosed.
This is specific to pensions but might help and I would think a lot of firms adopt it across all products:
https://www.handbook.fca.org.uk/handbook/COBS/19/8.html
I include every charge/fee that I can.
There are different disclosure rules for different types of product, along with different acronyms for what the bundled charges figures are (AMC, OCF, TER etc) and these are used incorrectly all the time. I don't think any of the various rules permit the AMC only as a minimum disclosure.
However, the bottom line for me is that if you are aware that a client is subject to a cost, what possible justification do you have for intentionally not telling them about it?
It really is that simple.
As an example, when I do BR or EIS, I include the fees that the scheme manager charges to the investee companies as a fee the client pays. I get a lot of pushback on that. But, as far as I am concerned, our client is an investor in that company, and therefore a charge to the company is going to mean a reduction to the client's equity return. The fact that there is a gap in the disclosure rules that means we don't technically need to disclose it is nonsense.
If it has an identifiable impact on our client's return and we know it exists, it should be declared.
As long as you are identifying all the costs on both sides, this is a fair comparison.
The main annoyance we have found is the fact that KIIDs don't show MIFID II charges and just the OCF, but illustrations from platforms will generally show MIFID II charges, with a large amount of time, the OCF element not matching the KIIDs.
You then report the charges in the suitability report, and whilst 95% of clients don't read it all properly anyways, the 5% who do will query why there are differing charges across 3 different documents!!!