Fees and charges can eat into returns to a disturbing degree. Here, we explain why net performance is the figure investors should really be paying attention to as they compare firms like for like.
Our mission is to provide investors with transparency in what can seem an opaque world. We advocate side-by-side comparisons to drive better value alongside better matched wealth management relationships.
It is good practice to periodically reassess your wealth management relationship to ensure you don’t see fees creeping up and performance becoming stagnant over time
Many people will be wanting to take a look back at how their wealth manager has performed right now. However, they must look beyond headline figures to correctly assess the value they are receiving.
It is good practice to periodically reassess your wealth management relationship to ensure you don’t see fees creeping up and performance becoming stagnant over time
The impact of fees
Awareness is rising, but investors typically don’t pay enough attention to the very great impact fees can have on performance. This is particularly the case at the more cautious end of the risk spectrum, where yields have been under pressure now for years.
Never assume that robust performance is contingent on paying higher charges.
There may be a good reason to go with a manager which charges higher fees, like it being a genuine outperformer or offering specialist services. But ensure paying a premium really is justified. Only pay for the services you want and need.
By asking for performance to be presented net of fees you can then see just how much of a drag they represent – and quantify the gains that might be possible by giving an alternative provider a try
By asking for performance to be presented net of fees you can then see just how much of a drag they represent – and quantify the gains that might be possible by giving an alternative provider a try.
You may find that fees are calculated/presented in different ways by different institutions. Simply ask that they are all presented in the same way to assist your comparisons; a Total Expense Ratio is a commonly used figure.
Top Tip
It is vital that investors secure the very best performance and the lowest possible costs; even seemingly small differences can make a big difference long term. Find your best-matched wealth managers fast and free and get proactive about the real figures at stake.
Lee Goggin
Co-Founder
Clever performance comparisons
Our matching tool makes it simple to directly compare a shortlist of wealth managers which all meet your needs on both performance and costs. Leading firms will transparently present their performance track record over a number of periods and against several benchmarks to assist your choice.
Those looking at alternatives could also ask a potential wealth manager to model the gains they stand to make over time with better performance or lower fees to get even more inspiration
These might be well-known market indices or “composite” benchmarks more accurately reflecting the actual make-up of a portfolio. There are many metrics which could be useful, but the most meaningful for investors are the peer benchmarks that compare performance across 50 or more firms for a variety of “risk buckets”. These typically present all performance net of fees, making it easy for anyone to see the end value they should gain from a wealth management relationship.
Those looking at alternatives could also ask a potential wealth manager to model the gains they stand to make over time with better performance or lower fees to get even more inspiration.
Get proactive about performance
Changing wealth manager is a lot quicker and easier than you might think, and could be one of your best ever moves. Small differences compound to make a very large difference to your wealth over the years, and each one lost on poor net returns has a pernicious impact.
You can exert very great control on the fees you pay and you shouldn’t neglect your chance to compare performance on a number of metrics to ensure you get the best deal
You can exert very great control on the fees you pay and you shouldn’t neglect your chance to compare performance on a number of metrics to ensure you get the best deal. There is a huge choice of providers out there and seeing whether you could be getting a better one costs nothing through our 3-minute search.
Important information
The investment strategy explanations contained in this piece are for informational purposes only, represent the views of individual institutions, and are not intended in any way as financial or investment advice. Any comment on specific securities should not be interpreted as investment research or advice, solicitation or recommendations to buy or sell a particular security.
We always advise consultation with a professional before making any investment decisions.
Always remember that investing involves risk and the value of investments may fall as well as rise. Past performance should not be seen as a guarantee of future returns.
