RIY explanation

richallum

Anyone got a good client facing explanation of this please?

benjaminfabi

No, I've tried. There isn't one. Best I've got:

When you invest money you pay charges. This reduces the amount that gets invested. Because the money isn't invested, it doesn't grow. The reduction in yield illustrates the true cost of the charges, by adding back the 'lost' growth.

Because you have to pay charges to invest money, knowing this 'true' cost really adds very little value to you in isolation. Without paying some charges, you get no growth. What's important is to accept the need to pay charges and then seek out the best investments for your needs at the best value available. Or pay an adviser to do it for you.

The true value of the reduction in yield is therefore as a comparison against similar options.

Jona

You cannot control the markets but you can control how much you pay to access them....

edevan5

Here's what we use in the Plan Comparison (replacement business) section of our reports.....

"....It is not always easy to compare the charges of two plans on a like-for-like basis. Reduction in yield (RIY) is an industry standard figure that illustrates the impact the total charges applied to a plan will have on its potential growth rate. It provides a snapshot comparison of the cost of one plan with another. The lower the RIY - the better value the plan offers in terms of charges....."