December 5, 2020

UK Investors hit by £16bn in hidden fees each year

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sterling-rooted-280From Regulation Feb 6 2013 BY: Esther Armstrong , News editor , Portfolio Adviser

UK investors face over £16bn in hidden fees and charges per year, according to latest research from SCM Private for its True and Fair Campaign launched just over a year ago.

Hidden dealing costs in the UK are estimated to be currently running at £16.3bn annually SCM Private said, although founding partner and CIO of the company, Alan Miller, added this was a very conservative estimate.

“We have consistently been very, very conservative when it comes to calculating this figure and most other people working on this would come up with one far higher.”

At a reception held at the Houses of Parliament and hosted by Mark Garnier MP and Tom Blenkinsop MP, SCM Private also revealed results of an online survey of investors to gauge their views of fees.

The survey of more than 2,000 individuals was conducted in January by Research Plus and showed 92% of savers and investors think firms should be legally obliged to provide full disclosure of investment fees and charges.

In addition, almost three quarters of investors questioned said they wanted costs and fees disclosed as a single cash figure, rather than as a percentage.

Despite this more than half (58%) said they did not know the cost of their current products, including fees.

Gina Miller, founding partner of SCM Private, said: “A year ago, just after we launched the True and Fair Campaign, the former head of the IMA, Richard Saunders, described the industry’s hidden charges as ‘a myth’.”

The IMA has since capitulated with new CEO Daniel Godfrey stating in a report at the end of last year: “I want to see the best possible disclosure to customers so they understand what the full costs of investing are, and can see it in a way which is meaningful and representative.”

SCM Private has also received a pledge from the Financial Conduct Authority’s new CEO Martin Wheatley to look at the issue of hidden fees and ensure fund managers are not taking more than their fair share.

The firm plans to launch a true and fair calculator in March which will allow investors to view their total cost of investing in a fund as a cash figure.

Miller was reluctant to explain exactly how the data for the calculator is compiled as he does not want fund groups thwarting it.

“When investors understand the toll costs can take on their investments they can make smarter decisions. We have worked very hard to build a new model calculator based on the principles of the True and Fair Campaign,” he said.

Inspiration for the campaign has been taken from US authorities, which Miller said has legislated to give investors greater knowledge and transparency when it comes to fees.

He concluded: “Why should UK investors be second class citizens to their US peers?”

 

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