Why not talk about fees for once?


Unlike 2017, this year's returns are not going to cause any euphoria. A large majority of the investment portfolios will probably end the year in negative territory. But even in comparison to the benchmark, the picture is unsatisfactory in the majority of cases. In general, portfolio managers were simply too often wrong in their investment decisions.

(Percent) Fl I Y B G E
Benchmark 0.4 -0.6 -2.5 -3.5 -5.2 11.1
-Risk   3.2 4.5 6.2 8.7 11.1
Median -2.9 -3.6 -3.9 -5.1 -4.9 -6.9
-Risk   2.8 3.5 5.2 7.2 8.4


Last year’s returns were good, so what’s the big deal some might ask. Personally however, I would not just shrug this year’s returns off as a blip off the back of a good year. We certainly recommend conducting a transparency test. A good wealth manager also provides a transparent benchmark comparison in difficult years and explains the reasons for the shortfall in performance. In a year like 2018, this very often means that even good managers have some explanation to do in terms of their (unsuccessful) investment decisions. Fact is: those managers which openly communicate wrong market assessments and lower port- folio returns are more likely to be regarded as professional than those which simply blame poor market conditions for the negative results.

So with rather disappointing returns and simultaneously little changes in the economic environment, the opportunity to address a more tangible issue should be seized: fees.

Generally, there is a slow increase in pressure on asset managers' fees. However, this pressure develops similarly to interest rates – it only increases very slowly. In fact, investors who are not conducting their offer searches via the ZWEI Wealth Experts tender platform, do hardly benefit from a decrease in fees at all. The overwhelming majority of asset managers generate annual fees for the investors of well over 1.5 percent of the assets under management. To add to the displeasure, these fees are usually not made clearly visible to the investors. The fees for an absolutely interchangeable service, such as the custody of portfolio assets, continue to cost the average investor up to half a percent per year. Realistically though, such a service should hardly account for more than a few basis points. And these are just a couple of examples – the list goes on and on.

Therefore, a brief and concise recommendation from ZWEI for your year-end discussion: address the fees. Request a list of fees for the past year in the run-up to the meeting and ask how the fee structure can be optimised. Our experience shows that good asset managers are able to provide very transparent information on the issue. However, those asset man- agers which struggle to provide the detailed information or even react with a snub reply need to be met with particular scepticism.

As always, we are more than happy to personally answer any questions you may have regarding the topics discussed in this issue.


Patrick Müller
CEO, ZWEI Wealth Experts