Question on investment Fund pricing

daheff

Registered User
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Currently talking with a Financial advisor around investments.
Struggling to get my head around AMC/CIV fees on Zurich/aviva/Irish life type investment funds and the reported returns. FA doesnt seem to have a clue (or at least is not being anyway clear).

My question - are KID returns shown after AMC is taken, or before?

I don't understand what a CIV is, other than its a fund charge. Shouldn't that be included in the AMC?


thanks for any & all advice.
 
When a customer is sent a statement, with unit prices and fund values, those figures include the effects of the AMC.
 
When a customer is sent a statement, with unit prices and fund values, those figures include the effects of the AMC.
Thanks, but I'm not yet an investor. I'm looking at the returns on the KID docs and can't see anywhere if those return figures are before or after AMC.
 
Thanks, but I'm not yet an investor. I'm looking at the returns on the KID docs and can't see anywhere if those return figures are before or after AMC.
Does it matter given that those returns are simply illustrative and not actual guides to future returns, never mind guarantees? In short, they're useless.
 
Currently talking with a Financial advisor around investments.
Struggling to get my head around AMC/CIV fees on Zurich/aviva/Irish life type investment funds and the reported returns. FA doesnt seem to have a clue (or at least is not being anyway clear).

My question - are KID returns shown after AMC is taken, or before?

I don't understand what a CIV is, other than its a fund charge. Shouldn't that be included in the AMC?


thanks for any & all advice.
The KID is intended to show the real cost of investing including all distribution costs (commissions) and additional fees and expenses like trading costs not reflected in the AMC which is purely an administration cost.

The problem is that the KID shows the maximum possible commission available and is therefore instantly dismissed by the broker fraternity who will claim never to take anything near the maximum available.

Further confusion arises because the KID disclosures don’t apply to pension plans and an entirely different disclosure regime applies to firms regulated as investment advisers under the investment intermediary act or indeed MIFID.

So it’s hardly surprising that the public (and indeed many brokers) are confused.


 
@daheff

The first thing you need to do is talk to someone who understands how all the charges work and isn't reluctant to be transparent with them. So, find a different advisor.

This is what CIVs are and, depending on the company, other product providers use different terms (like Other Ongoing Charges OOCs)

The Annual Management Charge may include trail commission (some advisors like to call this an annual fee) but doesn't include CIVs/OOCs or portfolio transaction costs (PTCs).

When you add the AMC and the CIV/OOC together you get the equivalent of a Total Expense Ratio (TER).

KIDs are generic and are not representative of the price of the product you are buying. They represent the worst charging structure that you could buy from via an advisor/product provider. So, if a product provider has an investment product with circa 50/60 different charging structures, you don't know what structure applies to what you're buying until the point of sale. Becuase the advisor chooses that. But, KIDs in their current form are a mess and misleading.

Every product provider has a 'menu' of charging structures for each product - for a €5,000 investment you could be charged an AMC or 2% or you could be charged an AMC of 0.65%, the advisor/intermediary (and type of service you want) will dictate that.

CIVs/OOCs and PTCs are included the the fund performance figures/unit prices on the product provider websites. Product providers vary in how the AMC is presented in Fund Fact Sheets and Performance Figures - for example, a provider may include 0% or 0.4% etc.

The good news is that there has been progress on the transparency/disclosure (with the sole exception of Executive/Directors Pension Plans) of products over the last while. It's way more important to get the investment/saving product right from the outset because the Exit Tax regime limits the ability to move to something better. Pension products (without early exit charges in first 4/5 years), not so much, or just ride out the 4/5 years.

Gerard

www.bond.ie
 
Currently talking with a Financial advisor around investments.
Struggling to get my head around AMC/CIV fees on Zurich/aviva/Irish life type investment funds and the reported returns. FA doesnt seem to have a clue (or at least is not being anyway clear).

My question - are KID returns shown after AMC is taken, or before?

I don't understand what a CIV is, other than its a fund charge. Shouldn't that be included in the AMC?


thanks for any & all advice.

I know this wasn't your question, hopefully Marc and GSheehy have answered that. Just a comment though, I'd urge you to find a different advisor and do as I done. Tell them you don't understand the charging structure, tell him you won't invest with someone who can't tell explain to you clearly what it is. Give him a real life example and ask him to detail the breakdown of charges. For example "if I invest 10K 100K in this product, please tell me how much I will pay in fees".

If he is anything other than very knowledgeable and completely transparent regarding the fees / charges, don't do business with them.
 
Currently talking with a Financial advisor around investments.
Struggling to get my head around AMC/CIV fees on Zurich/aviva/Irish life type investment funds and the reported returns. FA doesnt seem to have a clue (or at least is not being anyway clear).

My question - are KID returns shown after AMC is taken, or before?

I don't understand what a CIV is, other than its a fund charge. Shouldn't that be included in the AMC?


thanks for any & all advice.
I recently spent 4 hours on a flight with the charging booklet for some of the pension and investment products for just one life insurance company.

At the end of that I’m able to confidently assess how the charging structure that a broker selects adds to the basic cost of a product but I don’t have clear line of sight on the actual real (let’s call them wholesale) costs of the product itself.

It’s extremely difficult to separate out product costs from distribution costs (retail cost to consumer) and this is very much by design.

It also varies depending on which “channel” you buy the same product. So if you buy from your high street bank you’ll typically pay more than if you arrange the exact same product via a broker.

All of this is why my firm prefers to use a more transparent investment solution wherever possible in preference to the murky opaque world of the commission led insurance company products
 
Does it matter given that those returns are simply illustrative and not actual guides to future returns, never mind guarantees? In short, they're useless.
yes it does. it gives you an indication of which funds have performed better in the past AFTER costs. fully appreciate past performance is no indication of the future performance etc etc. But you need to have something to start basing your investment decisions on. Cost is a huge part of it. So is performance.
 
yes it does. it gives you an indication of which funds have performed better in the past AFTER costs. fully appreciate past performance is no indication of the future performance etc etc. But you need to have something to start basing your investment decisions on. Cost is a huge part of it. So is performance.
That only makes sense if they provide data for assumed performance before and after charges.
 
That only makes sense if they provide data for assumed performance before and after charges.
well i would prefer to know if its before or after charges. If its before charges a 3% return drops off and isn't much better than a reasonable term deposit (with deposit having much less risk).

Also if some quote before AMC and some quote after AMC its difficult to compare like for like. I don't think its too difficult an ask to be able to confirm this? Its almost like they are deliberately trying to be as obtuse as possible.
 
well i would prefer to know if its before or after charges. If its before charges a 3% return drops off and isn't much better than a reasonable term deposit (with deposit having much less risk).
So you're just deducting the annual management fees from the assumed return so the projected return figures are useless as I said in the first place.
 
@GSheehy et al I note the comments that KID cost disclosures are generic using worst case broker fees but are the worst case broker fees not fairly standard and so the KID does provide a fair comparison between companies' underlying charges?
 
KIDs use best (lowest) and worst (highest) charges that could apply to the product you're buying.

Those don't just include intermediary fees, they include entry/exit, performance, transaction, administrative and operating costs by the product provider as well.

I have no evidence to suggest that the figures in the right hand column (worst) are standard or that they provide a fair comparison.

My focus is on the left-hand column.

At a guess, I would say that the typical charges for an advisory service is somewhere in the middle.

Gerard

www.bond.ie
 
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KIDs use best (lowest) and worst (highest) charges that could apply to the product you're buying.

Those don't just include intermediary fees, they include entry/exit, performance, transaction, administrative and operating costs by the product provider as well.

I have no evidence to suggest that the figures in the right hand column (worst) are standard or that they provide a fair comparison.

My focus is on the left-hand column.

At a guess, I would say that the typical charges for an advisory service is somewhere in the middle.

Gerard

www.bond.ie
I think the likes of zurich cost themselves a lot of business with the non disclosure of TER. I would love to invest and have somebody do all the admin such as exit tax. I'd happily pay the 1% amc. the biggest turn off for me is not knowing the additional charges.

having said that, surely somebody somewhere knows the TER for something like indexed world equities through zurich outside of the amc? I assume that something like prisma have hidden fund charges. but something like a simple index?
 
I think the likes of zurich cost themselves a lot of business with the non disclosure of TER.

How did you come to this conclusion?

The Other Ongoing Costs are disclosed in their Range Of Funds Guide so you just add those to the AMC you've been quoted and you have the equivalent TER.

In the context of your query, that could be 0.66% to 2.01% for the Indexed Global Equity (Blackrock) fund or (say the Prisma 4 Fund) 0.72% to 2.07%. depending on what service you want, what distribution channel you buy the product through and the intermediary who decides what the AMC is going to be . The higher OOCs for Multi Asset Funds are down to their construct - Equities, Bonds, Alternatives and Property elements.

Gerard

www.bond.ie
 
How did you come to this conclusion?

The Other Ongoing Costs are disclosed in their Range Of Funds Guide so you just add those to the AMC you've been quoted and you have the equivalent TER.

In the context of your query, that could be 0.66% to 2.01% for the Indexed Global Equity (Blackrock) fund or (say the Prisma 4 Fund) 0.72% to 2.07%. depending on what service you want, what distribution channel you buy the product through and the intermediary who decides what the AMC is going to be . The higher OOCs for Multi Asset Funds are down to their construct - Equities, Bonds, Alternatives and Property elements.

Gerard

www.bond.ie
because the majority of people believe that when they sign up that the max fee is 1% amc, when this is not the case. its not clearly disclosed. this is why alot of people are going through degiro etc, to avoid being ripped off.

so you srew saying if I went through an execution broker and just wanted to track an index through zurich, the max charges is 2.01%? but could be as low as .66%
 
In the context of your query, that could be 0.66% to 2.01% for the Indexed Global Equity (Blackrock) fund or (say the Prisma 4 Fund) 0.72% to 2.07%. depending on what service you want, what distribution channel you buy the product through and the intermediary who decides what the AMC is going to be .

Saying that OOCs/CIVs are not cleary disclosed isn't going to make that true. This may have been true a few years ago but is not the case for this particular company now. It's also possible that it's the fault of the person that you sought the information from initailly didn't bring your attention to them, didn't understand them and generally couldn't be bothered because there's no obligation on them to disclose them.

The Fund Guide is here

I have no idea what any other intermediary or execution only broker might charge someone to access that fund. I only know what people buy from me, and it's the lower one.

Gerard

www.bond.ie
 
Saying that OOCs/CIVs are not cleary disclosed isn't going to make that true. This may have been true a few years ago but is not the case for this particular company now. It's also possible that it's the fault of the person that you sought the information from initailly didn't bring your attention to them, didn't understand them and generally couldn't be bothered because there's no obligation on them to disclose them.

The Fund Guide is here

I have no idea what any other intermediary or execution only broker might charge someone to access that fund. I only know what people buy from me, and it's the lower one.

Gerard

www.bond.ie
faie enough. in regards to funds guide... is it simply a matter of adding the additional amc to ongoing costs to inital amc. Will that give the TER. If so, its more clear than I originally thought
 
If you choose a fund with an 'additional management charge' (mainly external funds not managed in-house by Zurich Life), yes.

There are over 30 funds without 'additional management charges'.


Gerard

www.bond.ie
 
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