The requirement for advisers to show their client how much they are paying in pounds and pence is driving clients into passive funds, according to several advisers.
Scott Gallacher, of advice firm Rowley Turton, said the rule, introduced last year as part of the Mifid legislation, put pressure on costs and charges, leading to some opting for cheaper products.
He said: "Increased charge transparency will almost certainly put pressure on charges and lead to advisers seeking lower cost alternatives.
"To be honest we’ve seen this for a little while when many of the previously ‘hidden’ charges started to be disclosed."
Alan Steel, chairman of advice firm Alan Steel Asset Management in Linlithgow, said fee pressure on advisers has for several years driven demand for passive investments.
He said: "I have noticed that since RDR many IFAs raised their annual charge from 0.5 per cent to 1 per cent, and simultaneously switched to passives. So they could argue that total costs fell.
"We are not in favour of trackers. But Mifid will concentrate client minds on what they get for what they spend on costs, that’s for sure."
Paul Stocks, an adviser at Dobson and Hodge in Doncaster, said clients often did not want to see a detailed breakdown of charges.
He said: "[I met] a client this week who runs his own accountancy related business and has over £1m Aum with us – I ran through the Mifid II cost disclosure with him and his immediate reaction was 'why do you have to tell me all this' followed by 'why can’t we just look at the total cost to invest'.
"I’m broadly neutral on fund costs as I feel that the true bottom line is net returns and the total cost to invest – we also believe that there are active funds which can deliver above average, net of fees, performance over the medium to longer term.
"Obviously there’s a lot of vocal coverage of passives (and we do use passives as part of our portfolios) however I feel that in certain aspects it’s due to us having to be defensive to being challenged on portfolio costs.
"Having said that, I’m particularly sensitive in the lower risk areas of portfolios given that we’d expect costs to be a larger proportion of any growth."
He said cost was being seen as ‘the be-all and end-all’ whereas the reality was much more subjective and net return after all fees was what matters.
Paul Gibson, an adviser at Granite Financial Planning in Aberdeen, believes passive funds consistently perform better than active funds due to their lower charges.
He said: "Costs matter in investing and lower cost funds have demonstrated that they consistently beat higher costs funds over the longer term.
"I have not seen evidence of restricted advisers in particular reducing costs and the overall costs of investing still seems incredibly high. It does ultimately lead to lower returns for investors."