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Industry Fees

Fees that clients pay have been coming under a lot of scrutiny lately, as they should. The financial services industry is notorious for being vague or complicating discussions about, or disclosures of, fees. Why? Well, obviously, it’s in order to earn a higher margin from clients. A 2017 study by the Financial Conduct Authority in the United Kingdom found many problems with the way in which fees were charged and disclosed and the value for money investors are receiving from active fund managers.

Over the long-term fees really do matter. A 1% saving on a portfolio which generates a 6% gross return would increase the final value of your investment by approximately 10% over 10 years and by approximately 22% over 20 years. On a £10 million portfolio this would mean saving £1,502,084 over 10 years and £4,666,098 over 20 years. So next time you get invited to a swanky event by your financial advisor, think carefully about who is really paying for the tickets…

Now we’re not saying that you shouldn’t pay fees (even we charge a fee) but you have to ask what you’re paying for. If the NET OF FEES returns your active fund managers deliver consistently beat their respective benchmarks, and we’re not talking about being lucky a couple years in a row, then they deserve to charge a higher fee as they’re skilled (assuming too that they haven’t taken on excessive risk to beat the benchmark).

There are so many studies that have been done around the world to show that more than half of active fund managers do not outperform their benchmark NET OF FEES over long periods of time. The reason is due to a combination of unskilled money managers, managers who may have some skill but charge fees which are too high thus eroding the excess return, managers who effectively track the benchmark although purport to be active (“benchmark huggers”). The reason for this is also intuitive. If one assumed that performance returns were normally distributed around the mean and the mean return is the benchmark, then half would outperform the mean and half would underperform the mean. If everyone takes a fee, which obviously is the case, then more than half of managers NET OF FEES would underperform the benchmark.

Our Fees

Our fee is simple to understand. We charge 0.3% per annum (+VAT where applicable) on the assets we manage. Importantly we do not charge fees on cash balances which are not yet implemented.

The total costs of the underlying ETFs is about 0.25% to 0.3% per annum.

The cost of execution and custody is not determined by Omba but we assist clients in assessing their current providers for competitive rates and credibility of their platform.

Impact of Fees

See the impact of a Higher fee rate on your future returns

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HIGHER FEE
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LOWER FEE
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Impact of Fees

HIGHER FEELOWER FEE
AMOUNT INVESTEDXXXX
END VALUE BEFORE FEESXXXX
FEESXXXX
VALUE AFTER FEESXXXX

Expected Growth

Next 15 Years

Disclaimer and Assumptions

  • Projected returns help you compare the impact of fees over the period but actual returns may vary and past performance is not an indication of future returns;
  • The calculator assumes you re-invest all returns over the selected period and does not take into account any tax you must pay on investment returns or brokerage costs;
  • The calculator assumes Expected Return is an annual amount compounded annually, and the Fee input is an annual fee, compounded quarterly;
  • The default fee rate of 2.56% for Higher Fees is based on a study by Grant Thornton;
  • The calculator is not intended to be your sole source of making an investment decision. It is provided to you as a guide to see what the impact of paying excessive fees could be. You should consider getting holistic advice from a financial adviser who can assess your ability and willingness to take risk and assist you in achieving your financial goals.
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