Beware hidden fund commission fees

While the new Retail Distribution Review (RDR) rules are about to come into effect, you still need to watch out for hidden fees. James McKeigue explains.

It's the biggest change in financial services since the Big Bang. On 1 January, the Retail Distribution Review (RDR) kicks in. The idea is to make the cost of financial advice far more transparent and ensure the advice itself is of better quality. But true to form, with just weeks to go, some advisers may be taking advantage of their less knowledgeable clients.

Under the current system independent financial advisers (IFAs) can offer what looks like free advice. In reality they receive commission for recommending certain products from fund management houses and/or the fund platform that handles the administration of the investment. These commissions can be up-front payments ('initial commission'), or an ongoing fee calculated as a percentage of the total investment (a 'trail commission'), or a mixture of the two.

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James McKeigue

James graduated from Keele University with a BA (Hons) in English literature and history, and has a certificate in journalism from the NCTJ. James has worked as a freelance journalist in various Latin American countries.He also had a spell at ITV, as welll as wring for Television Business International and covering the European equity markets for the Forbes.com London bureau. James has travelled extensively in emerging markets, reporting for international energy magazines such as Oil and Gas Investor, and institutional publications such as the Commonwealth Business Environment Report. He is currently the managing editor of LatAm INVESTOR, the UK's only Latin American finance magazine.