Wealth Manager - the site for professional investment managers

Register to get unlimited access to Citywire’s fund manager database. Registration is free and only takes a minute.

New City Initiative calls for funds TER to include dealing commissions

New City Initiative calls for funds TER to include dealing commissions

Think tank New City Initiative (NCI) has called for dealing commissions to be included in the total expense ratio of a fund so investors can clearly identify the total costs charged against their investment in any year.

In a response to the Financial Conduct Authority’s consultation paper on the use of dealing commission (CP 13/17), the NCI's chariman, Magnus Spence, said: 'We would also encourage the FCA to require investment managers to disclose the level of dealing commissions incurred, as a percentage of the assets under management, in the Key Investor Information Document (KIID) in each of the preceding three years.

'Additionally, we would recommend that a detailed breakdown of the research costs is included in the KIID, showing the largest 10 suppliers and the nature of the research received.'

However, Spence (pictured) also said the NCI would 'strongly oppose' any steps towards the complete ban on charging research costs to funds, because the combination of clearer rules, as proposed by the FCA's consultation paper, and more transparent reporting would 'help eliminate conflicts of interest' between investment managers and clients when it comes to the use of dealing commissions.

Any ban on permitting boutique fund managers to pay for genuinely value-added research out of client money would be detrimental to smaller firms and, ultimately, their clients, Spence said.

'Smaller funds often produce industry-beating performance. Not only that, they provide crucially-needed competition to large players, giving investors wider choice when selecting funds,' Spence added.

Conversely, the chairman welcomed 'any measure which brings greater clarity to the ways in which dealing commissions can be used to pay for research.'

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play Dispelling the sustainable investing myths

Dispelling the sustainable investing myths

There's a bit of a buzz around sustainable investing at the moment. We speak to three wealth managers to find out what they think.

Play Inside ETFs: positioning for the Fed rate rise

Inside ETFs: positioning for the Fed rate rise

Natalie Fast discusses how investors are using ETFs to position for a rate rise with guests Irene Bauer from Twenty20  Investments and Markit's Simon Colvin.

Play Wealth Manager Retreat: video highlights

Wealth Manager Retreat: video highlights

The UK's leading wealth management talent gathered at our annual event at the Grove celebrate the best in private client portfolio management.

Wealth Manager on Twitter