One of the key changes introduced by MiFID II on 3rd January 2018 was the requirement for providers to issue clients with an ‘aggregated information on cost & charges’ document.

The main objective of this disclosure is to help clients understand the costs and charges associated with their investment. However, due to the complex nature of investments and the simplicity of the communications, we have been receiving an increasing number of queries about these documents. This blog aims to provide guidance to those reading these ‘costs and charges’ documents.

The requirements

Costs & Charges disclosure requirements must be provided:

  • Initially, before the investment service is provided (ex-ante disclosure).
  • Where there is an ongoing client relationship, aggregate costs and charges must be provided to clients at least annually during the life of the investment (ex-post disclosure).

Information to be provided to clients

As a minimum, firms need to aggregate all costs and charges in connection with the adviser firm and all costs and charges associated with the recommended solution. The problem is there is no standardised document and different providers are taking different approaches. Some firms may deal with ‘total charges’ and some may break these down. If broken down, the disclosure might include:

  • Costs incurred for an adviser firm’s service, such as, fixed fees or percentage of funds under advice.
  • Costs that will be incurred depending on the type of investments and amounts invested.
  • Costs of any third-party services, such as a platform or using a discretionary management firm (DFM).

Things to bear in mind when reading these letters

We believe transparency over charges is exactly what is required in the industry, but the very nature of investments means these documents may not be easy to comprehend and there are certain things to bear in mind whilst interpreting these letters.

Most providers will issue this disclosure with the provision of an annual statement. However, some providers also issue quarterly letters where these charges are disclosed. If you total these up it is likely you are double counting the charges being paid.

It is also important to mention, by the time you receive these statements, they are usually out of date and these charges will be historic as well as based on a fund value at a given time.

Our costs and charges are highlighted in our terms and conditions which are signed before any new business is completed. If you feel these charges are excessive, we encourage you to question them. Our advisers will be happy to articulate what service is provided in the charge.

For the most part, these statements will be received by post, without your adviser on hand to explain why certain costs have been incurred and what they represent. If you have any questions about these charges, please speak to your adviser or contact the office on 01423 223640.

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