At Moneycube we strongly believe in bringing transparency to investors. For too long, investing has been made seem mysterious – usually in order to charge excessive fees. Here’s Moneycube’s rundown on advisor fees to consider for when investing.
Pay direct, or via commission
Fees mostly come in two basic flavours: ongoing, and one-off fees – explained in detail below. There’s often a choice between paying the fee directly, or having it charged to you as commission.
Some investors prefer to pay advisor fees directly in order to remove the risk of a conflict of interest, where financial advice is influenced by the commission on offer, rather than what’s right for the investor. The UK and the Netherlands have gone so far as to ban advisor commission for investments.
On the other hand, charging as commission can have tax advantages, as commission is not subject to VAT. For pensions, income tax relief also applies if the fee is taken as commission. And because you ‘pay as you go’, it matches the cost of an investment to its lifetime better.
There’s no right answer, but if things are getting complicated it is probably not for your benefit as a customer.
Moneycube likes simple
The good news? At Moneycube, you can avoid many of the fees traditionally levied on investors. We’ve worked hard to develop a great value and simple fee structure.
Moneycube doesn’t charge account fees, dealing fees or a platform fee. We also avoid funds with entry and exit charges, and incentive fees.
We focus on funds with a 100% allocation rate. This means that whatever you invest, all of it is used (allocated) to buy units in the selected fund.
Because we focus on funds, there’s no stamp duty. And with our offshore funds, the government insurance levy doesn’t apply. (We’ll get stuck into these terms in detail in subsequent articles).
In general, we believe that if you’re getting ongoing service, an ongoing fee is right. And if you’re getting a one-off service, you don’t want still to be paying for it five years later.
Ongoing service fees
This is a regular fee for service your receive from an advisor. It might be an annual fixed fee, or a percentage of the money you invest using the service. It’s often charged as commission, or a ‘trail fee’, which means the fund provider deducts it from your investments, and pays it to the advisor.
Moneycube charges ongoing fees for our investments service. We charge 0.5% of the assets you invest using our service (full details). That covers the cost of our advice, as well as ongoing updates and information about your investment and its current value.
This might be an hourly rate, or a package deal for consultation and recommendations from a financial advisor.
For pensions work, Moneycube charges a one-off advice fee to advise on and arrange a pension for you (again, you’ll find full details on our fees page).
All the other advisor fees
Fees Moneycube won’t charge you (but some people do):
- Upfront commission which eats into your investment. Here, a slice of your money – maybe as much as 5% – is taken right away to pay your advisor. Moneycube’s against this, because it means not all of your money is invested to work for you.
- Setup, entry and access fees. Some advisors charge these to cover the cost of taking on a new customer. But paying any kind of setup fee has the same effect as upfront commission: it immediately cuts the value of your investment.
- Paying twice for the same thing. This doesn’t need too much explanation: if your advisor is receiving commission for an investment you’re making, why would you pay an hourly rate? Most advisors will offset these fees in the customer’s best interest.
Have you been charged even more exotic fees? We’d love to get your feedback.