TER Territory

The annual cost of investing in funds can have a major impact on your portfolio returns and performance. However, we find that many wealth managers and particularly private banks are a little disingenuous when it comes to reporting the true costs involved.

Clients and potential investors need to be aware that there are more charges involved in investing than the headline charges of front end fees and annual management charges. It is now the case that fund managers have been compelled into disclosing the other, rarely mentioned, ‘administrative and internal charges’ by disclosing their Total Expense Ration or TER. These combine the annual charges with other ‘administrative’ costs (including such items as trustee fees, custodian charges, auditors, legal costs, marketing etc).

However, even though TERs are now being disclosed it is often difficult to find them amongst the small print – funny how managers shout how well they are doing but whisper what they charge.

At Investment Quorum we believe in total transparency in charging and we are able to access ‘institutional’ charging rates for the majority of the funds we purchase on behalf of clients. This means that we are able to pass on these discounts to substantially reduce the costs within our clients’ portfolios. Further, we utilise the very liquid but low charged Exchange Traded Funds within portfolios to further mitigate costs.

In these times of lower economic growth and potentially lower returns, then costs and charges must become a priority. If we take an example of an investment of £10,000 growing at 7% per annum over 20 years the return, with no charges applied would be £38,697. However if the TER applied is 1% this reduces the return to £31,650. If we demonstrate a typical private bank TER of 3% this slashes returns within the portfolio to a mere £21,043.

The significance of this is clear. Investors need to ascertain the levels of ongoing charges applied to the portfolio, what are the charges in the underlying investments, what happens to any fund rebates received by the wealth manager and what are the switching costs to ensure they are receiving reasonable value for money.

We look forward to being challenged on this – we think you will be pleasantly surprised.

For further information on the investment portfolio management services offered by Investment Quorum please contact

Lee Robertson, CEO on 0207 337 1390 or lee.robertson@investmentquorum.com

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