Investors could be losing thousands on expensive tracker fees

investmentweek.co.uk:

The figures revealed that investors using most expensive passive funds could see their returns significantly diminish over the long-term.

According to the study, investors using the most expensive passive funds could see their returns significantly diminish over the long-term.

The stark difference in charges can leave investors in the priciest passive funds with a portfolio worth less than that of the cheaper option, even when funds deliver almost identical performance.

IA: Inflows into trackers double in August as fixed income funds revert to outflows

AJ Bell found that after ten years, a portfolio in the most expensive UK tracker funds would be worth £1,800 less than the cheapest tracker with the same performance.

According to the investment platform's calculations, an investor holding a mixed portfolio across seven of the main investment sectors across global equity markets could be almost £9,000 better off over ten years, based on a £100,000 investment.

The most expensive tracker funds are often at least 0.2% more expensive than the cheapest option, and in some cases can cost 0.5% or even 1% more than the lowest price alternative tracking the same region. 

The most expensive trackers could have initially been priced with a fee covering investment, administration and any financial advice received, but many of the funds have now switched to investment platforms where investors could switch to cheaper fund, the firm said.

The current rules prevent investment platforms from notifying investors on possible cost savings on passive holdings in their portfolio, as it would be deemed financial advice.

The ongoing Advice Guidance Boundary Review is considering ways to improve the help customers receive, which AJ Bell said