Beware Ryanair-style fund fees

British investors are being ripped off when it comes to hidden fund fees. Tim Bennett explains what should you watch out for.

When choosing a fund, one crucial factor is often overlooked fees. Invest £10,000 over 20 years at an expected annual return of 7% with an annual management fee of 2.5% and you will be around £5,203 (or 18%) worse off than someone who only pays 1.5% per year in fees. You'd hope product providers would make it easy to find out what you are paying in fees. But you'd be wrong.

There's a good reason why many British fund providers are happy to make fund charges difficult to compare. According to the Review of Financial Studies in 2009, the average British unit trust or open-ended investment company (Oeic) charges 2.21% of its clients assets annually compared to 1.04% in America. That's something an industry that sold £78bn of products in the last three years according to Bloomberg.com (14% more than the sales total for the previous seven years) is keen to hide.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free
https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

Tim graduated with a history degree from Cambridge University in 1989 and, after a year of travelling, joined the financial services firm Ernst and Young in 1990, qualifying as a chartered accountant in 1994.

He then moved into financial markets training, designing and running a variety of courses at graduate level and beyond for a range of organisations including the Securities and Investment Institute and UBS. He joined MoneyWeek in 2007.