Investing Online in Funds Just Got Cheaperwritten by Bella Palmer
Those investing online funds through UK stock brokers have just received a £1 billion boost from the financial regulator. An FCA ruling means that the millions of British investors still invested in older, more expensive funds must be transferred into cheaper versions as soon as practically possible.
Over the past several years, increased competition between online investment platforms and asset managers has led to dramatic drops in annual charges levied by the most popular funds those investing online pay into. The rise of fund comparison sites has also helped force asset managers into more competitive pricing. However, while most investors choosing new fund options through their UK stock broker or investment platform have benefited from this change, as much of a third of all of the
Funds are often made up of different share classes that come with different fees. This allowed asset managers to offer significant fee discounts to institutional investors while retail investors paid higher fees. The justification was that while the product both categories of investor paid into was the same, institutional investors were buying in with tens of millions or even hundreds of millions of pounds. The difference
However, the legislation only applied to new investors, leaving existing investors in the more expensive legacy share class. While it was possible for them to switch the value of their investment
The new ruling means that responsibility for moving investors over to
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