We do take a small trailer fee from the annual management fee but it's pretty small. The annual management fees are set by the fund manager so our trail fee doesn't result in a higher price than if you bought the fund directly from the fund manager.
By eliminating the entry fees completely we would be foregoing 50% of the transaction costs which is a very large drop. The rationale for dropping the entry fees for May was of course to encourage people to purchase funds in the post SSIA environment and this coupled with the minimum €100 investment amount lowers the barriers to entry for investors. Naturally we keep our pricing under continual review and the question arises - if we dropped our entry fees completely would this lead to a substantial increase in volume that would justify the revenue foregone. Our crystal ball hasn't come up with an answer just yet on that one!
Hi,
Thank you for replying.
I would imagine that you could gain some insight into the fees question by seeing if there is a statistically significant increase in contributions to your "fund of the month" over other funds, and also the impact of your May '07 "no entry fees" promotion. My gut feeling is that people are incentivised by the "fund of the month". It could be harder call on the May promo due to SSIA money sloshing around!
I currently like the idea of a monthly investment (other than pension) of smallish amounts of money. To this end, with the help of AAM, I see Rabo, Quinn, and Eagle Star as contenters. Quinn offer trackers, but now with a good range of options and no fees beyond low yearly management fees. This is good! I would imagine they are doing well. Eagle Star (via execution only broker and 7.5k Eur upfront) offer a wide range of trackers and active funds for a low management fee, but some exit penalties on a sliding scale for the first five years. Rabo offer an interesting range of active funds, a decent interface, but seeming rather high fees. I do feel from reading AAM (and also my personal view) that people like the range of Rabo funds, but that the fees are a real issue.
Since Rabodirect are competitive on deposit accounts, it would seem that you have the appetite to be extremely competitive. I can see that it would be difficult for you to remove all exit and entry fees for active funds (although I'd imagine you might have some leverage with Robeco, a part of Rabo bank [I believe]). [Aside: I suppose you could investigate introducing a few passive index trackers with no entry/exit fees and see how it works out.]
Back to your existing fund selection: Assuming that the "fund of the month" works well, I guess you could hypothetically look at something like 0.5% entry, 0.5% exit for Eur 100 - Eur 500 purchases of one fund, dropping to 0.25% entry, 0.5% exit for "fund of the month", and then 0.25% entry, 0.5% exit for amounts of Eur 500+, dropping to 0% entry, 0.5% exit for "fund of the month" for Eur 500+. I am not sure what ClubMan would consider to be a good deal (perhaps he could comment), but something like this would be a lot more attractive to me! The lower your fees, the more likely (my guess) that people will buy to hold (as mentioned by gravitygirl above), the less churn, and the more you will make on management fees as the fund holding grows! It would be nice to see you somewhat competitive with ETFs etc. I would potentially be a risky move, but Irish people seem to be getting more picky about fees!
On the tax issue (which keeps getting mentioned), a simple calculator that is initially targeted at (a) Self Employed and (b) PAYE worker that presents "this is what you enter ... on this Revenue form available here ... in these fields" would make things clear for most. Some worked examples might help.
Cheers!
