Who Stole My Investments?


WHILST IT IS fair to say some brokers/advisors/institutions deal with their clients fairly, there is a situation whereby substantial charges can be added to clients’ investments, some without their knowledge. The business of “financial advice” is mostly commission-based and, if markets are providing growth, these commissions can be buried in various ways.

Whether the markets are volatile or not performing, charges start eating a big hole in our net worth. Bid & Offer spreads, establishment fees, administration charges, trail fees, management charges, portfolio management fees, and establishment fees are a few that can be added to portfolios, but how many of them are compulsory? Not many is the answer, but the fact is the facility exists to add these charges for introducers that wish to. Let’s look at a few: Unnecessary Bid & Offer spreads are a way of charging typically

5- 7% to buy into a product and are designed to pay commission to introducers. Management fees are usually a lifetime fee charging between 1-1.5% of funds under management; this fee can be replaced with an establishment flat fee spread over a number of years that eventually stops and is based only on the initial investment and not the investment plus growth. Trail fees pay a regular percentage of the initial investment. The portfolio management fee, typically 1-1.5%, is the one that really takes the biscuit. This one was originally introduced to replace commissions and was based on managing investments on a regular basis but now they can be added on top of the commissions along with trail fees and, in a lot of cases, the cost is not justified as regular management is rarely done until you make an enquiry.

There are thousands of small fund distributors out there that are trying to compete with the big fund houses (most of which don’t pay commissions) which offer an extra commission typically 5% to get advisors to put their clients into these funds. The problem is that, because of their size, they sometimes have liquidity problems and then take longer to encash. maybe 6-12 months. On top of this they could very well get into difficulties and freeze any encashment for years. The best advice is ask, ask, ask: Every time you commit, ask for full disclosure of all charges before signing. Also, check your statements regularly to see what is being deducted. And finally, insist on dealing with only large fund houses, quoted on Bloomberg and with daily liquidity.

If you are already stuck in any of these investments and need assistance, join EPIC, the Expat Professional Investment Club, and educate yourself at the same time as avoiding unnecessary costs.

Written by John Marks, EPIC

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