Research for Money Mail has found that hidden fees and charges are eating into around two-thirds of investor’s profits – despite new rules that are supposed to make it clearer what you pay to invest.
Secret charges to investments include fund management fees, administration costs, fund supermarket levies and the cost of advice.
Figures released by fund firm, SCM Private show that a profit of £2,762 could be reduced to just £880 as a result of unavoidable fees.
This research comes to light following a long plight by Money Mail for the regulator, Financial Conduct Authority to enforce one simple annual calculation that displays how much of an investment is lost to charges.
Currently there is no industry standard, and rules that were supposed to ban commission on fund sales – and thus make investing cheaper – have actually seen charges increase by an average of 28% since their introduction in January 2013.
Adding to concern is new research conducted by the True and Fair Campaign, which shows a third of investors are not aware of what they are charged to make investments.
Gina Miller, who is in charge of the campaign and is a co-founder of SCM Private, said:
“The UK investment industry operates an Alice in Wonderland existence where nothing is as it seems. Even senior investment insiders admit they cannot understand what the costs are.”
In order to be aware of hidden charges before investing, Daniel Godfrey, chief executive at the IMA, says investors should read a fund’s Key Information Document and find the Ongoing Charges Figure. This includes most of the charges a fund will incur.