esearch from SCM Direct has laid bare a pattern of hidden costs charged by fund managers. The wealth management firm, run by Alan Miller and Gina Miller, has been a long-term advocate of greater transparency in the investment industry. I'm an advocate of transparency too. I created this presentation which breaks down the research as a part of my mission to teach 1 million people how to invest. https://lnkd.in/edvtVvs

1. HIDDEN FEES FUND
MANAGERS CHARGE
A L P E S H PAT E L O B E

2. W H AT R E S E A RC H S H O W S
Research from SCM Direct
has laid bare a pattern
of hidden costs charged
by fund managers
The wealth management
firm, run by Alan and
Gina Miller, has been a
long-term advocate of
greater transparency in
the investment industry
However, their findings
may come as a surprise to
some, with many fund
managers charging
double or triple their 'at a
glance' fees
SCM investigated the
breakdown of fees on
Fidelity and Hargreaves
Lansdown for the 20
biggest funds in the UK
All Companies sector
Their research exposed
what they believe is a
lack of transparency that
is running rampant in the
industry

3. M I L L E R ' S M I S S I O N
• This is not the first time the Miller's have voiced their
displeasure at the state of UK fund managers
• Since 2012, their True and Fair campaign has sought
reform in the investment and pensions sector
• In recent years, Gina has also drawn attention to "price
fixing" in the industry
• In 2017, she investigated 683 funds with £320bn under
management and found that 70% had identical charges
This Photo by Unknown author is licensed under CC BY-SA.

4. M I F I D I I
The MiFID II regulations from 2018 have forced the
hands of many fund managers, exposing the hidden
fees they've hidden from investors for years
The financial consultants' Lang Cat underlined this in
a post from 2018, revealing the scale of these extra
charges
However, in some cases, such as the JPM Global
Macro Opportunities Fund, this number was as high
as 85%
This Photo by Unknown author is licensed under CC BY-SA-NC.

5. I S I T T I M E T O L E A V E
F U N D M A N A G E R S ?
For years, investors tolerated Hargreaves Lansdown’s
high fees because of their excellent service
However, with more competition entering the market,
many have become sceptical about their value
For example, Hargreaves Landsdown charges 0.45
per cent on the first £250,000 invested
This Photo by Unknown author is licensed under CC BY-NC.

6. T H E S C A L E O F F E E S A N D L O S T R E T U R N S
Hargreaves
London: -
£121,307
Close
Brothers: -
£103,144
AJ Bell: -
£102,787
Interactive
Investor: -
£85,962

7. W H Y I N V E S T O R S
S H O U L D B E C A U T I O U S
A B O U T F U N D S
• Other hidden fee tricks that funds use were exposed in
recent years
• M&G and Jupiter were shown to be charging administration
fees far in excess of their rivals
• Indeed, by applying blanket admin fees and retaining any
surplus, these funds were pocketing significant returns at
their investor's expense
• By indexing their admin fees to profits, each percentage
increase saw them draw in more money, despite admin costs
being a fixed expense
This Photo by Unknown author is licensed under CC BY.

8. T H E C O S T O F
I N V E S T I N G
I N F U N D S
In an excellent and comprehensive article by the late
Vanguard founder John Bogle, he outlines four
separate hidden costs that could lose investors 33% in
returns
This Photo by Unknown author is licensed under CC BY-NC-ND.

9. T R A N S AC T I O N C O S T S
Mutual Funds and ETFs buy and sell shares of funds
These transaction costs can add up quickly because
of their high volume, as index funds buy and sell
shares as investors enter and exit the funds
Bogle puts these transaction costs at around 0.5%

10. C A S H A S S E T S
Shares should outperform cash
However, many funds keep cash as they await opportunities
This, according to Bogle, means 5% in cash = 0.3% in a missed opportunity for investors
This Photo by Unknown author is licensed under CC BY-SA.

11. S A L E S L OA D S
Buying into a loaded fund can cost
around 5%
Investors can avoid this by using an
advisor, which could cost about 1%
However, even if you bypass an advisor,
you could be set to face brokerage fees

12. C O M P O U N D L O S S E S
• Bogle suggests these charges total around 2.27%
• This total may not seem huge, but when compounded,
they become significant
• He suggests that actively managed funds will shave a
staggering 1/3 off of your actual returns after 40
years

13. C O N C L U S I O N
Investors should be careful
when considering funds for
investment or retirement
SCM Directs research confirms
the scale of hidden and
misleading fees, while John
Bogle's work demonstrates the
damage that can be done to
returns by investing in with fund
managers

14. R E F E R E N C E S
• https://www.thetimes.co.uk/article/is-it-time-to-quit-hargreaves-
lansdown-v5q3hqslz
• https://www.moneymarketing.co.uk/news/gina-miller-led-manager-
launches-new-sipp-reforms-fees/
• https://www.theguardian.com/money/2017/mar/06/gina-miller-fca-
investigation-fund-management-price-fixing
• https://www.ft.com/content/a9ee95cc-0711-11e6-9b51-
0fb5e65703ce https://moneyweek.com/30259/interview-the-
turncoat-fund-manager-alan-gina-miller-60934
• https://www.thetimes.co.uk/article/funds-flout-law-by-charging-
billions-in-hidden-fees-says-gina-miller-lwtc8v5v3
• https://www.investmentweek.co.uk/news/4027245/gina-miller-calls-
independent-investigation-shameful-woodford-scandal
• https://www.thetimes.co.uk/article/fund-fees-that-are-three-times-
more-than-you-think-mv8wpvx55

15. www.campaignforamillion.com