Let the buyer beware

The best way to illustrate how most investment management fees work is by example. For instance, say there is £5m invested and it grows at a compounded rate of 8% per annum (pa), then after 15 years the fund will be worth £15.8m. Now consider how the fund would be diminished by the impact of investment management fees. If charged at 1% pa, the fund will be worth only £13.7m - over 13% less. While 1% pa may not sound a great deal, compounded over a long period the impact is material. This example illustrates why fiduciaries must ensure investment management fees are reasonable and fair...