Recent findings indicate that many wealth managers are not providing clear examples of initial charges, with 36 percent failing to do so, and half being unclear about ongoing costs. This lack of transparency, according to campaigners like the True and Fair campaign, is a deliberate obfuscation, making it challenging for customers to compare services effectively even with the introduction of "rate cards." John Barrass, deputy chief executive of the Wealth Management Association (WMA), acknowledges that more work is needed as rate cards vary significantly, hindering comparability.
The fee structures of wealth managers are notably diverse and can be substantial. Analysis by Numis Securities reveals that most wealth managers charge more than 2.5 percent annually on customers' assets, with total fees reaching as high as 7.5 percent for short-term investments. Cheaper alternatives exist, such as online wealth manager Nutmeg and SCM Private, which charge closer to one percent. Despite regulatory changes, including the Retail Distribution Review (RDR) which mandated direct fee-based charging, clients continue to struggle with comparing costs.
Upcoming European rules under Mifid II, set to take effect in 2017, aim to address this by forcing wealth managers and private banks to disclose all costs, including transaction charges and third-party payments, in a single aggregated figure. This is expected to offer a degree of comparability, although the WMA anticipates challenges in sourcing information and developing systems, particularly concerning the prediction of cost impact on future investment values. Research from Findawealthmanager.com highlights a strong consumer desire for a clear total cost figure and an easy way to compare fees, indicating a demand for greater transparency and value for money, rather than just the cheapest option. However, some analysts question whether costs have truly fallen, even if transparency has improved, especially for investors with $250,000 or more.
