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Close Brothers introduces all-in fee

Close Brothers introduces all-in fee

Close Brothers Asset Management has introduced an all-in fee in response to criticism from the Financial Conduct Authority (FCA) over the lack of clear disclosure around fund costs in the industry.

In a letter to investors, Close Brothers said it had replaced several charges taken separately from its funds with a single fixed fund management fee (FMF).

The changes went into effect this month.

It means investors will pay a single fixed fee instead of an annual management charge, fees to the depositary and variable expenses, such as the costs of third party service providers, as well as legal and regulatory costs.

However, two charges will still remain outside the FMF, with investors still paying underlying costs charged by any third party funds held in Close Brothers’ funds, as well as transaction costs. These changes impact 15 funds.

Close Brothers said some funds will see ‘small’ increases in costs (0.04%) from the latest published ongoing charges figure (OCF). The increase will be part of the annual management fee portion of the FMF, due to higher costs of running the funds.

It put the increased costs down to ‘enhancements’ to the management, monitoring, transaction processing, governance and oversight, partly as a result of changes in regulation.

The firm said it was making the changes because the funds’ previous OCFs ‘can change as the variable fund expenses change’, and added ‘there is no certainty that it will remain the same’.

It added: ‘We believe that the introduction of the FMF and the separate disclosure of the synthetic and transaction costs will make our fund charges more transparent, whilst also removing a number of variable elements.’

In the FCA’s recent communication with fund management firms, the regulator raised concerns around uncertainty and lack of clear disclosure around costs, and Close Brothers said the purpose of its FMF is ‘therefore to provide investors with a more transparent fee structure’.

The firm said it cannot raise its FMF without notifying investors first, giving them 60 days’ notice and requiring FCA approval before implementing any increase to the fee. It also stated that it will review the FMF of each fund at least annually, to ensure that the level is appropriate.

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