‘All-inclusive fees’ will be the norm: Godfrey

‘All-inclusive fees’ will be the norm: Godfrey

Tectonic changes to the way fund managers charge investors look to be underway as the industry’s top policymaker said ‘all-inclusive fees’ would become standard practice.

The prediction was made by Daniel Godfrey, chief executiveof the Investment Association (IA) which represents the UK’s £6trn asset management industry.

His remarks underscore a growing shift to greater transparency in the industry, which is battling accusations of ‘rip-off’ charging.

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“There’s likely to be a gradual move in the direction of the OCFs [ongoing charges figures] being the only charge,” Mr Godfrey said.

Aberdeen Asset Management is understood to be looking at the all-inclusive model, while Schroders is also keeping an eye on developments.

Under all-inclusive fees fund managers must outline a single bundled charge in advance, rather than taking annual management charges and then levying for third-party services such as accounting and auditing as they happen.

The fee can be pegged to statutory measures such as the European OCF, which offers investors a prediction of most ongoing charges before they buy a fund but does not include dealing expenses.

Neil Woodford opted for an all-inclusive fee when he launched his new firm, Woodford Investment Management, last year and Invesco Perpetual has adopted a similar model.

Somerset Capital, Old Mutual Global Investors and Aberdeen have all already taken steps to cap their fees to match, or closely track, their OCFs. This could pave the way for the firms to switch to all-inclusive charges in future.

For more see this week’s The Editor column.