Many people make the mistake of thinking a small fee difference of 1% can’t make a big impact on their final returns. However, due to the magic of compounding (which Albert Einstein described as one of the most powerful forces in the universe), the negative impact tends to be much bigger than anticipated.
With investments, compounding occurs when the money you put away grows. That increased profit is reinvested to earn more. The same can happen with fees. If you pay high fees, year after year, the end total can eat up a huge portion of your investment pot.
Alan and Gina Miller have been spearheading the fight for 100% fee and holdings transparency. They have been vocal about improving ethics and responsibility in the UK financial services industry since 2009. This has culminated in the launch of the True and Fair Campaign in January 2012: www.trueandfaircampaign.com
Through the campaign, the Millers have worked tirelessly with Treasury, governments, global industry bodies and national regulators. They have successfully contributed to three EU Directives – MiFID II, PRIPS and The Shareholder Directive. These successes have vastly improved investment and pension consumers right and protections across the UK and Europe.
The campaign has also been successful in highlighting and achieving positive change around stock lending, closet indexation, research commissions, soft commissions, fund labeling, fund mis-pricing after significant events and regulatory failings.
SCM annual management fee 0.4%
Administration & custody fee
Typical underlying ETF charges
Estimated trading costs of buying and selling ETFS
Estimated transaction costs within the ETFS
Total cost of investing
Fees will vary according to the current selection of ETFs and current levels of trading activity. The latest fees are shown in all monthly factsheets. The figures above are based on the average fees and charges. They are weighted by the amount invested within each of the SCM GBP Portfolios as at the end of July 2019. When investing via the Hubwise SIPP, an additional charge is made of 0.1%+VAT. This is subject to a minimum annual charge of £15+VAT and a maximum annual charge of £50+VAT. An additional fee of £125 +VAT applies to any SIPP that is in drawdown.
SCM annual management fee 0.4%
Administration & custody fee
Typical underlying ETF charges
Estimated trading costs of buying and selling ETFS
Estimated transaction costs within the ETFS
Total cost of investing
Fees will vary according to the current selection of ETFs and current levels of trading activity. The latest fees are shown in all monthly factsheets. The figures above are based on the average fees and charges. They are weighted by the amount invested within each of the SCM GBP Portfolios as at the end of July 2019. When investing via the Hubwise SIPP, an additional charge is made of 0.1%+VAT. This is subject to a minimum annual charge of £15+VAT and a maximum annual charge of £50+VAT. An additional fee of £125 +VAT applies to any SIPP that is in drawdown.
Typical UK IFA wealth management fees are c. 2.00% per annum (Numis/FT 2023).
The average SCM Direct Total Cost of Investing is c. 0.92% per annum (updated monthly across all our factsheets).
Due to the magic/ mathematics force of compounding, what appears to be a small 1.08% per annum difference can have a dramatic negative impact on your investments over the medium to long-term.
If you invested two £100,000 pots over 5 years with two different companies — one charging 0.92% per annum and one charging 2.00% per annum, and both grow at 4.5% p.a. before costs, the pot with the lower-cost fund manager (your return via SCM Direct) would have been £19,228. It would have been £10,408 with the higher cost investment manager.
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