One (does not) talk about costs
Banks and asset managers do not like to talk about costs. There are good reasons for this. Because the total costs are usually much higher than expected and high costs are certainly no guarantee for good performance. High time for a little more transparency on the subject. When it comes to fees and costs, it is difficult for an investor to gain an overview. After all, more than a dozen cost factors can be distinguished, and even the much-cited all-in fee only covers a part of the costs actually incurred.
Total costs are much higher than you think
ZWEI Wealth's studies and analyses show that the total costs of asset management are on average almost 60% higher than clients think. Even the so-called all-in fee by no means covers all costs. Here is a list of the most common types of costs:
- Custody fees
- Transaction fees
- Management fees
- Product fees
- Performance fees
- Administrative fees
No correlation between price and performance
Anything expensive is per definition considered to be of high quality. What we are familiar with from other business sectors unfortunately does not apply to asset management. Surprisingly, we rather find the opposite. The best asset managers are in fact often cheaper. Why is that? Firstly, good asset managers use expensive products much more sparingly. Like a good chef, they rely on good 'raw materials' and do not use expensive finished products. Secondly, the good asset managers are specialised in their fields and achieve favourable economies of scale from which the clients benefit.
What to do? Ask your bank or asset manager for a total cost overview according to the above categories. Ideally, the fees should be listed in Swiss francs/ US Dollars (any other currency) so as not to be misled by 'small' percentage figures.
The annual cost control
As a Wealth Office, we carry out an annual cost control for all clients. All banks and asset managers report all costs incurred in the past year. These are checked, compared with benchmarks and renegotiated where appropriate. Clients receive a transparent overview of the total costs and benefit from fair prices.