What is low cost but charges a fortune?

Fairness. Openness. Clarity. Buzzwords all. Buzzwords used frequently to describes the many facets of our industry.

Cost is a topic that is also frequently commented upon by the great and the good; cost in terms of both adviser remuneration but also vehemently in terms of investment funds. Active managers are often viewed as robbers, to put it kindly; eroding the long term wealth appreciation of their clients and certainly not offering the “bang for buck” that is promised. The biggest target for this ire is the Multi-Manager, with many often exceeding 2.5% in terms of ongoing annual charge.

Because of this, it is often commented that active fund management is poor value and therefore any opportunity to reduce the cost of investing for the client is a positive. Passive investing has become more and more popular amongst advisers, with managed portfolios, mapped to a certain client risk category and killing two proverbial birds with one stone. A manager that uses a wholly passive approach must be cheaper than its active counterpart, right? Right?

TCF Investments have been brought to my one-eyed attention for claiming to deliver something that they are quite plainly not. For the uninformed, they “offer a range of low cost, well diversified, risk graded passive portfolios”. Furthermore, they believe in disclosing “all the costs of running our funds” and “there should be no ‘unknown unknowns’ inside our portfolios”. Sounds good, nay great. So what are the costs?

The website cites their low cost approach, but does not give any indication of their costs. The published fund factsheet (which I was unable to find on the website incidentally) also has a distinct lack of charges. We have definite consistency, but what about transparency and fairness? So in the pursuit of information, I contact TCF and am told that the TER is between 0.8% and 1.0%, but this again shows a distinct lack of transparency. If the fund group in question cannot advise me of their charging structure, then who can I rely upon? In a word, Morningstar.

To my absolute amazement (and this is backed up by the data supplied to me by various platforms) the TCF fund range are charged as follows:

NameIMA SectorKIID Ongoing ChargeTotal Clarity Cautious Growth A AccMixed Investment 20-60% Shares2.63Total Clarity Defensive A AccMixed Investment 20-60% Shares3.79Total Clarity Diversified Balanced A AccMixed Investment 40-85% Shares1.86Total Clarity Diversified Lg Trm Gr AFlexible Investment2.87

Now those who have interacted with me may guffaw at the next statement, but I am entirely agnostic when it comes to investments; I am neither pro-active, nor pro-passive. I simply have the time, experience and resource to review the marketplace in order to select what I believe to be the best investment choice for my investment process. What I cannot abide is the rhetoric that comes from certain parties which portrays one camp or the other to be what it is plainly not. This is happening in the whiter than white, post RDR low cost passive universe and let’s be perfectly honest, if it was an active fund manager or product provider who were pulling this kind of stunt, the industry would be all over them like a rash.