Online fund service sends shock waves around UK

Dhaka,  Fri,  26 May 2017
Published : 20 May 2017, 19:19:37
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Online fund service sends shock waves around UK

The “disrupter” looming over the retail investment market is nothing short of a giant, according to a global media report on Saturday.

News last week that Vanguard, the world’s best-selling asset manager, had launched an online service to sell funds directly to UK investors sent shockwaves through the industry. Why? Because there is so much profit sitting there waiting to be squeezed.

Readers will no doubt be able to recite by heart Professor John Kay’s mantra for successful investing: “The surest fire way of increasing the return on your investments is to pay less to people in the financial services sector.”

“We’re different,” is her opening gambit. “We think most people pay too much for their investments. After all, every pound you pay in charges is a pound you don’t get to keep.” It is also a pound you don’t get to compound. Although fees and charges might look quite small in percentage terms, over time they can make a huge difference to your investment returns.

Let’s start with fund management fees. These are much lower for passive funds, which is what Vanguard is famous for. The Pennsylvania-based asset manager has an array of ultra low-cost index tracking funds and exchange traded funds (as well as competitively priced active funds) attracting more than $315bn of investment globally in 2016. This comes at a time when fund charges and the relative performance of actively managed funds are coming under regulatory scrutiny.

 
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