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  • Fees - Fees and Charges explained

Portfolio growth comparison


This graph shows a comparison in performance after all charges (of 3.1%) for an initial stake of £100,000 utilising a wealth management model common amongst 'IFAs' and bank owned wealth managers or, a 'Fund of Funds' Open Ended Investment Company (OEIC) or Unit Trust as promoted by the current leading online investment websites, as compared to a £100,000 Q portfolio with costs of 1.18% per year.

In both cases the portfolios are modelled with same average return from underlying investments of 7% per year,  the return forecast rate recommended by the FSA.  

For the traditional IFA solution, or Fund of Fund solution, there is an assumed annual fee deduction of 3.1% per year (more than 44% of the FSA forecast return rate!) comprising;

  1. a typical OEIC or Unit Trust total expense ratio (TER) of 1.75%p.a.
  2. Annual switching costs of 0.6% assuming a 30% turover of the portfolio and 2% initial fees on the unit trusts after initial commission discounts
  3. an IFA or manager fee of 1% p.a. 50% funded from the trail commission available from the fund managers
  4. a platform fee or Fund of Fund admin fee of 0.25% funded from trail commissions

Total annual fees = 3.1% (assuming a 0.7% "trail" commission)

For the Q solution the deductions are;

  1. The average TER of an ETF of 0.4% p.a.
  2. The Q fixed fee of £600 per year, which gets ever smaller in percentage terms as the fund grows.  
  3. £180 of dealing charges based on 18 trades at £10 a trade 

Total annual fees = 1.18% for a £100,000 portfolio, or 0.98% for a £150,000 portfolio

Of course, the difference is magnified more and more as the portfolio grows and the time period lengthens - making the Q fixed charge smaller on a percentage basis and the trading charges smaller. The example below is for a portfolio starting at £150,000.