Investors reap the rewards of RDR

Fees calculatingInvestors are paying over a fifth less in annual fund fees as a result of the Retail Distribution Review (RDR), introduced by the UK government in 2013.

The initiative banned commissions paid to financial advisers by fund companies for selling their products. Instead, investors now have to agree fees with their advisers upfront.

A study by online investment platform Rplan found that the average annual fee paid for the top 100 funds on its platform had fallen by 22%, down to 103 basis points.

Investors are also saving money due to higher passive investment. In the first quarter of this year, over a quarter of the most popular 100 funds sold on Rplan’s platform were passive, compared to 10% in the same period in 2013.

RDR has opened the gates for passive funds, which advisers were more reluctant to offer pre-RDR as these funds paid no commissions.

Yet Nick Curry, director at Rplan, says investors still need to be aware of adviser or platform charges, which can vary by a factor of three for portfolios of £30,000 (€38,000).

Curry says charges should be expressed in both percentage terms and pounds and pence, “that way investors can see exactly what the impact is of the fees they are paying”.

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