Are you Paying Too Much for Your Investment Portfolio?
The Chase Buchanan teams around
the world are focusing on making sure every one of our clients is 2021 tax
ready. Repeatedly, as we conduct investment portfolio reviews and fee
comparisons, we uncover ‘hidden’ costs – that aren’t always understood.
So:
·
How can you assess whether your investment fees are competitive?
·
Do you know how much you are ‘really’ paying per annum?
·
And why is a portfolio review essential for every investor?
Let’s take a look.
The
Role of Portfolio Reviews in Being 2021 Tax Ready
Perhaps you feel that an
investment portfolio review sounds like an unnecessary use of your time?
If your products are performing
well, you’re making sound returns, and you are confident that savings
and investments are being handled in the right risk exposure category – why
would you benefit from a review? The overriding issue here is that reviews
are vital to the continued health and growth of your
portfolio.
Risks change, climates evolve,
plans progress and markets expand. And so, to have a clear overview of the
ideal investment strategies to align with your future goals, it is beyond
critical to engage in a comprehensive review to assess whether there are ways
to maximize your returns.
This year, such reviews have become even more essential, in the advent of Brexit.
Changes to tax legislation and
citizenship status may have profound impacts on the stability and tax
efficiency of investment vehicles. Time is of the essence to structure your
portfolio in a future-proof way.
The other priority factor is to analyses
your costs. Many Chase Buchanan clients come to us and are astonished at how
revealing a cost-comparison can be. A vast number of investors aren’t clear
about what their fees cost per annum, how they are structured, and what impact
they have on net returns.
Therefore, being 2021 tax ready
isn’t just about the nature of your investments – it is about safeguarding your
assets to ensure they are performing to your optimal
benefit.
How Investment Fees Impact Your Returns
Financial advisers (of any type)
must disclose the fee basis before they begin managing your portfolio.
However, there is a great
potential for hidden costs – where investors don’t understand where that cost
is being charged, or how it is calculated. It is easy to focus on investment
returns and growth figures, but the reality is that high fees can have a
tremendous impact on your net investment returns every year.
Here are a couple of basic
illustrations:
·
You invest £100,000 today, with a 4% annual return. Your wealth
manager charges 2% in yearly fees. In 10 years, you have earned £21,899 on your
investment. Had you opted for an independent investment portfolio review, and
switched to an adviser charging 1% per annum? You’d have increased that return
by £12,494.
·
You invest the £100,000 in a mutual fund, with a 1.5% charge per
annum. That doesn’t sound like much! However, in the same ten years, you will
have paid £15,000 in fees. Had you invested in a fund with, say, a lower 1.2%
fee, you would have paid £3,000 less.
These simple figures show how
even fees that appear low can quickly stack up; and take a chunk out of your
returns.
If you’re not certain about what
your fees are, don’t have a clear breakdown of how they have been applied, or
aren’t sure whether you are paying more than you should be – it is time for a
portfolio cost analysis.
Why
an Investment Portfolio Cost Analysis is Vital
Chase Buchanan offers our
clients access to our cost-comparison tools, which enable us to identify what
you are paying clearly, and the impact on your investment portfolio.
The benefits of doing so are
immeasurable:
1.
Identify what fees you are paying, including those that aren’t
immediately apparent.
2.
Receive impartial advice about how those costs relate to the
sector, and if it is likely, you are paying over the odds.
3.
Fresh advice regarding long-term investment products, and
whether more tax-efficient or higher return opportunities now exist.
4.
Calculating the savings available by reducing your fees and how
much you could boost your portfolio income by.
5.
Demonstrating the impact of hidden charges and how you can
mitigate the underlying implications for your investment portfolio.
As with all industries, there is
a world of difference between advisers and the value for money on offer. It may
be that we identify that your portfolio fees are reasonable and competitive –
but by and large, we find the opposite. Working with an adviser or wealth
manager is based on a foundation of trust. Investors often trust that their
adviser is doing the right thing, and therefore give them free rein to charge
fees or uplifts, even when a negotiation would be advantageous.
Over time, portfolios diversify
and expand, and so pre-existing fee structures may remain in place, even if
they no longer remain beneficial. It’s worth remembering that an adviser is
managing your portfolio in return for professional fees.
As with any ongoing service, you
have control over managing those costs, and being able to make an educated
decision about whether the expenses you are paying are no longer in your best
interests.
Investment
Portfolio Fees
The biggest issue with
understanding investment portfolio fees is that these can vary significantly
depending on what sort of products you own. Most investors are busy people, and
simply do not have the time to conduct a thorough analysis of their annual
statements.
This complexity leads to
situations where investors are paying far in excess of what would be
reasonable, and are reliant on investments to fund their retirement aspirations
or life goals, while not receiving the full value of returns they should be
expecting.
We wouldn’t buy a home without
reviewing the local market – and so it stands to reason that it is crucial to
compare fees between asset managers!
Here are some of the most common
types of fees:
·
Advisory fees (or management fees): the professional fees
charged for selecting a fund, or building a portfolio.
·
Annual expenses: usually a yearly charge as a percentage of your
portfolio. This type of fee is charged as a yearly expense on exchange-traded
funds and mutual funds.
·
Exit fees: costs incurred when you sell unit trusts or OEIC
assets.
·
Investment management costs: fees charged for
selecting new investments for your portfolio, or researching new opportunities.
·
Loads or transaction fees: charged when you instruct your
adviser to make a transaction. Back-end loads can be a significant cost,
charged by some mutual funds when you sell fund shares.
·
Performance charges: applied by some funds in addition to annual
fees, when specific targets are reached.
·
Platform fees: charges levied by online fund platforms.
Some fees are payable directly,
some are deducted from your fund, and others are charged when a specific event
or transaction takes place. So it is very likely that fees are being taken from
your portfolio value without your needing to make a bank transfer or sign a
cheque.
Chase Buchanan provides professional
wealth management services to clients all over the world. We have offices across Europe, as well as global
offices in Canada and the US, and an Administration Centre in the UK. Our role
in investment portfolio reviews is to ensure that you are 2021 tax ready, your
investments are positioned for optimal stability and returns, and your fees are
competitive, reasonable and transparent.
Resource
url:- https://chasebuchanan.com/your-investment-portfolio/
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