Talking Money: What is a fair fee to pay your wealth manager?
Graham Harrison of ARC explains what investors should - and should not - pay for
What is a fair fee to pay for the services of a wealth manager or financial adviser? There is a widespread suspicion that in many cases the answer is: less than you are paying now – if only you could get behind the figures to find out what the real all-in costs, including add-ons, actually are.
Next year new regulations will force managers of other people’s money to disclose much more information about their charges. In this latest podcast Jonathan Davis asks Graham Harrison, MD of Asset Risk Consultants (ARC), the company that monitors the performance of the great majority of private client firms in the UK, to explain how he thinks investors should work out what a fair fee is – and how best to get value for money in future. If Canadian experience is any guide, he says, the results could well surprise you – this is a must listen for anyone whose money is professionally managed.
Basis points: 1 basis point (or BP) = 0.01%, so 100 BP = 1%.
Ad valorem fees: are calculated as a percentage of the money in your portfolio.
Mifid 2: latest regulation from the EU which comes into force in January 2018.
ETF: exchange-traded fund (passive but tradeable security)
Tracking error: statistical measure of the extent to which an actively managed fund’s performance differs from its benchmark.
Below is a link to the ARC document on fair fee formula where mentioned in the interview:
These podcasts are the latest in a series of free regular interviews with prominent figures in the investment world, brought to you by Money Makers. You can sign up here to be notified about the next podcasts in the series, which are free to air – or subscribe on iTunes and other podcast services. Jonathan Davis, the founder of Money Makers, is also the founder of Independent Investor, a sister publishing and newsletter business. An active professional investor, he is a Senior Adviser at Saunderson House, a Member of the Chartered Institute for Securities and Investments and the author of several books about professional investors. More details at www.independent-investor.com.
co-founder and Group Managing Director of Asset Risk Consultants (ARC)
After obtaining a post graduate degree from the London School of Economics, Graham worked for HSBC in its corporate finance division where he specialised in financial engineering. Following a secondment with the Caribbean Development Bank, he moved to Guernsey to work for the Bachmann Group with a brief to develop asset management and investment consultancy services.
In 2002 he led the management buy-out of ARC, taking the company independent. He is a Chartered Wealth Manager of the Chartered Institute for Securities and Investment.
Graham serves as a non-executive director on a number of listed and unlisted investment vehicles and charities.