MiFID II, interesting piece on fees and charges
Discussion
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hstewie said:
hstewie said:http://www.evidenceinvestor.co.uk/revealed-last-tr...
https://www.langcatfinancial.co.uk/2018/01/i-would...
Thanks for the links.https://www.langcatfinancial.co.uk/2018/01/i-would...
The main problem with this is that funds were asked to recalculate charges on a historical basis, where often the relevant data was not stored at the time, so proxies and approximations will have been used. The methodology is vague in a number of areas, so the comparability of figures between managers is minimal at best.
MIFID II has created a massive amount of work (and cost) for very little benefit. Guess who will be bearing the costs - it's not the companies themselves!
Edited by sidicks on Tuesday 23 January 22:23
This is where it's difficult to know as I appreciate there will be different angles on it depending who you are.
I'm sure the consumer will pay, but equally as a consumer it doesn't seem unreasonable to want to know what I will be paying (where it's possible to do so and lack of transparency has been a "choice" by someone).
I'm sure the consumer will pay, but equally as a consumer it doesn't seem unreasonable to want to know what I will be paying (where it's possible to do so and lack of transparency has been a "choice" by someone).
bhstewie said:
hstewie said: This is where it's difficult to know as I appreciate there will be different angles on it depending who you are.
I'm sure the consumer will pay, but equally as a consumer it doesn't seem unreasonable to want to know what I will be paying (where it's possible to do so and lack of transparency has been a "choice" by someone).
To some extent yes, but:I'm sure the consumer will pay, but equally as a consumer it doesn't seem unreasonable to want to know what I will be paying (where it's possible to do so and lack of transparency has been a "choice" by someone).
The manager doesn’t know in advance how much trading they will be doing
The manager is trading to try and outperform the benchmark (as the customer expects them to do) - if they didn’t trade then plenty of people who argue they were getting paid for doing nothing!
The manger is only going to implement trades that they believe will add value
For some asset classes it’s very difficult to assess the actual trading costs.
Etc
It's pretty clear some firms are struggling, or reluctant, to comply with MiFIDII.
I'm all in favour of full disclosure and it's up to the industry to work out how best to do it.
The other key point is that "charges" need to be seen in the context of overall "performance". I don't mind an investment business charging for its services so long as it's delivering good performance in return!
I'm all in favour of full disclosure and it's up to the industry to work out how best to do it.
The other key point is that "charges" need to be seen in the context of overall "performance". I don't mind an investment business charging for its services so long as it's delivering good performance in return!
rockin said:
It's pretty clear some firms are struggling, or reluctant, to comply with MiFIDII.
I'm all in favour of full disclosure and it's up to the industry to work out how best to do it.
Even if it adds to your costs and hence reduces your returns? And may not be accurate / realistic or make sense and not directly comparable with anyone else?!I'm all in favour of full disclosure and it's up to the industry to work out how best to do it.
rockin said:
The other key point is that "charges" need to be seen in the context of overall "performance". I don't mind an investment business charging for its services so long as it's delivering good performance in return!
Most of this stuff isn’t what the asset manager is charging it is the costs incurred as part of managing the portfolio - that’s quite different.Edited by sidicks on Wednesday 24th January 14:01
I would still say that, for me, the bottom line is more important than the detail.
To my mind it's a bit like going to a restaurant. There's no point choosing to a restaurant where the wine is cheap if the food is overpriced and the service poor.
Nonetheless, anything which further reduces the traditional "smoke and mirrors" of the financial services sector must be good news. If MiFIDII can do that without adding another level of cost, I'll be more than happy.
To my mind it's a bit like going to a restaurant. There's no point choosing to a restaurant where the wine is cheap if the food is overpriced and the service poor.
Nonetheless, anything which further reduces the traditional "smoke and mirrors" of the financial services sector must be good news. If MiFIDII can do that without adding another level of cost, I'll be more than happy.
rockin said:
I would still say that, for me, the bottom line is more important than the detail.
To my mind it's a bit like going to a restaurant. There's no point choosing to a restaurant where the wine is cheap if the food is overpriced and the service poor.
Nonetheless, anything which further reduces the traditional "smoke and mirrors" of the financial services sector must be good news. If MiFIDII can do that without adding another level of cost, I'll be more than happy.
1. Clearly it does add a level of costTo my mind it's a bit like going to a restaurant. There's no point choosing to a restaurant where the wine is cheap if the food is overpriced and the service poor.
Nonetheless, anything which further reduces the traditional "smoke and mirrors" of the financial services sector must be good news. If MiFIDII can do that without adding another level of cost, I'll be more than happy.
2. Extra information is of no use if it doesn’t help the user (or potentially leads them to making the wrong (or flawed) decision).
Let’s take an example - a corporate bond fund, which has the ability to invest overseas to try and obtain higher returns.
A) the manager will only invest overseas if the expected returns from doing so outweigh the extra costs. This will clearly vary over time according to market conditions
This means that the costs incurred in the past could be very different to the future.
B) secondly, let’s assume that you are comparing 4 managers with the same corporate bond benchmark:
Manager A will only invests in GBP bonds
Manager B will have some investment in overseas bonds but unhedged
Manager C will have some investments in overseas bonds broadly hedged with futures and forward FX
Manager D will have some investments in overseas bonds closely hedged with swaps and forward FX
Which will show the higher costs?
Which will be the most risky?
Which will show the best performance?
Which will you invest in?
May be worth a listen around fees http://www.bbc.co.uk/programmes/b09nxznc
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