Why you should take a closer look at your investment fees

Examining the value of wealth management | kamolchanok - stock.adobe.com

My firm Calton celebrated its fifth anniversary this week and I have many warm reflections on the journey we have made so far – not least on the trust placed in us by our clients. But what I’d like to share with you today is something I’m especially proud of, the value that we offer them as a firm.

I have often written about the soft power of financial planning and the value that we bring in terms of peace of mind, reassurance and the confidence to navigate financial challenges and complexity.

Today, however, we’ll consider value in more of a “hard power” sense and tell a broader story about value and cost in financial planning. It’s a story that’s coextensive with the five years Calton has been operating, and it’s foundational to what we do.

Tom Ham | Supplied

When the Financial Conduct Authority introduced Consumer Duty in July 2023, you will not have noticed much fanfare. But, more than two years later, if you’ve seen your investment charges drop or received clearer information about your portfolio, you will have experienced the most significant regulatory shake-up in a generation working in your favour.

Consumer Duty has fundamentally changed how investment firms think about you and your money. For the first time, they’re required to prove they’re delivering genuine value to you, rather than simply avoiding complaints.

And the results? You’re likely paying less for your investments, understanding more about what you own, and benefiting from pensions and portfolios that have been designed with your interests to the fore rather than an afterthought.

Here’s what makes this different from previous regulations – it doesn’t just tell firms what they can’t do to their clients. It requires them to prove they’re doing right by them. Investment providers must now demonstrate that their products and services represent fair value specifically for their clients.

When I founded Calton in 2021, these considerations were foremost but not just because of the regulator. This is simply the right way of approaching any kind of client offering. As a new firm, we started this way. For older firms those who may have called their pricing “reassuringly expensive”, change has had to come.

Firms were forced to ask themselves uncomfortable questions. Now charges are compared against competitors, service quality measured against client expectations, and outcomes checked against industry benchmarks.

The regulation looks at more than just the fees you can see. It considers the total cost of your investment, including the hidden charges that used to lurk in the small print, transaction costs, and even the impact of poor performance. This comprehensive approach has exposed inefficiencies some would rather have kept quiet.

As financial planners, we serve as our clients’ advocates in terms of investment choices. We look for proof of value and choose the best options for clients. To appraise and review constantly is a responsibility we take seriously. I’m pleased to report many more good options have become available as providers compete with each other to demonstrate their value.

That marketplace response has been swift. When Consumer Duty’s requirements became clear, major investment firms realised they couldn’t just update their marketing brochures, they needed to cut what they were charging.

These headline-grabbing cuts triggered a domino effect across the industry; platforms slashed their fees to keep business, asset managers reduced charges on active funds. Even high-end discretionary fund managers, who traditionally avoided fee competition by emphasising personal service, have started offering lower-cost portfolio options.

This continued just this week, with Hargreaves Lansdown announcing cuts to their account fees.

The competition now focuses on what actually matters – value and results. Firms are now competing on how much you pay overall. Those that emphasised personal service now need to show that service actually improves investment returns.

Technology has inevitably helped smooth the journey, giving greater transparency. Consumer Duty hasn’t eliminated investment charges – nor should it – but it has made firms justify every penny they take from your account.

So, it’s worth taking a look to check what you’re being charged. Find out if you could be getting better value. If you already take financial advice, you can ask your adviser. Many people who are already set up will feel averse to change, but it is always worth asking the question about what might be achieved in this new landscape.

Something fundamental has shifted – the notion of “value for money” has become a measurable reality. For you as an investor, that’s genuine progress. Your money is working harder because more of it stays invested rather than disappearing in fees. That, ultimately, is what regulation should achieve.

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