The founding partner of London-based SCM Private said there was “practically no negotiation” of the kind seen between major platforms and fund groups post-RDR as there can be “significant amounts” invested in-house.
She added that multi-managers were reluctant to aggressively haggle because they may be on the receiving end of the same negotiation at some point in their careers.
Ms Miller said: “The main problem is that fund-of-funds are totally absurd and are sold on a completely false premise. This is because the manager of manager charges typically 0.9 per cent a year.
“Administration and custody charges on the underlying funds usually carry the same charge, then you add the cost of the adviser charging at 0.75 per cent, the adviser’s platform charge of another 0.25 per cent and the underlying trading costs by the fund managers of 0.5 per cent a year.
“You then have a real total cost of investing of about 3.2 per cent.”
Ms Miller said that clients would eventually spot this “grossly inefficient mix” when it ate up half their future returns, estimated at between 5 and 7 per cent a year.
She added: “Some of the smaller funds-of-funds, like many other small funds, have grotesque admin charges of more than 1 per cent instead of a 0.1 per cent to 0.15 per cent charge for a large fund.”
Chris Daems, director of London-based Principal Financial Solutions, said: “Charges, and in particular the transparency of charging structures, is something as a business we are always focusing on.
“Transparency is fundamentally important but our key focus is demonstrating value. Unfortunately, and increasingly, we are not convinced there is enough evidence for many active fund managers and discretionary fund manager arrangements. The case for passives is growing stronger by the day.”