How much is Fidelity platform costing via Bestinvest?
|Financial Advice | General
Asked by woolongong, submitted
24 April 2014.
I recently asked Bestinvest to provide me a breakdown of management costs for all my funds (in ISAs) over the last 5 years.
They came back with the response that they are unable to provide costs due to the fact that Fidelity (as Bestinvest use the Fidelity platform) are refusing to provide the breakdown. I then went to Fidelity directly and after several requests managed to get the breakdown. Initially I was told that the costs are included in the unit price of each fund as they do not remove any money from my account, they are not able to provide the values.
Finally after some perseverance, the figures were provided as though it was a big favour and I was informed that this is a one off. I understand of course that even the values eventually provided by Fidelity may not represent all of the costs involved, but at least it provides a good idea of the cost for the service.
I notice that the annual statement I receive from Fidelity does not provide any indication of costs incurred. Bestinvest provide no information either. I am at a loss to understand why management costs are not provided in annual statements. How is one to determine the cost of such a service? Is it normal for companies such as Bestinvest and Fidelity NOT to provide a breakdown of costs annually? Are there any rules in place to prevent this from happening?
Answered by Justin on 03 June 2014
I have a little sympathy with Bestinvest and Fidelity here, since trawling through your portfolio to calculate management costs for all funds held over the last five years would be a real pain as I doubt they have an automated process to do this. But I agree they should make costs much clearer and easier to access
The key when trying to calculate costs is to decipher how much your funds are costing and how much the discount broker and/or platform are charging.
On investments purchased before 6 April 2014 it is pretty likely you hold ‘retail’ versions of funds whereby the platform/broker fees are rolled in to the annual fund charges. For example, if a fund’s annual cost (‘ongoing charge’) is 1.65%; the platform might receive around 0.25% and the broker around 0.50%.
The alternative is that you own lower cost ‘clean’ fund versions whereby you pay the platform and/or broker separately, an approach that has been mandatory on new investments since 6 April.
So your first step is to determine which fund versions you own and then how much everyone is charging.
The first figure you want is the ongoing charge for each of the funds you currently hold. I agree most platforms and brokers are wrong not to include these clearly on online portfolio tools and valuation statements. This charge should tell you pretty quickly whether you own retail or clean fund versions.
If retail, ask Bestinvest and Fidelity to confirm how much they receive out of this charge.
If clean then you can ask Bestinvest what they and Fidelity charge you on top. Although nowhere to be seen on Bestinvest’s website, I gather Bestinvest charges a not insignificant 0.45% (for an execution-only service) and Fidelity 0.25% plus £45 a year. By contrast, if you went direct with Fidelity it would cost 0.35% in total. And other platforms are potentially cheaper still.
If you own retail funds these will have to be converted to clean by 2016, but you may find you will be better off requesting a conversion now or using a cheaper platform in any case depending on how much value using Bestinvest adds.
I think there is a genuine need for all fund managers/platforms/brokers/advisers to clearly display annual charges in both percentage terms and equivalent pounds and pence – as this is the only way investors can easily understand what they are paying. But given much of the industry has gotten very rich by charging relatively (or very) high fees over the years they have very little incentive to do so. It will take either customer pressure or, more likely, new rules to change things.
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