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The beginning of the end for over-charging?

June 11, 2013
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A few weeks ago we wrote about the importance of taking the long-term view when investing - and how the industry all too often does the very opposite. If fund managers weren’t prepared to change their ways, we suggested, then the regulators and, failing that, our politicians should compel them to.

So we were heartened to hear this week that one leading fund group is taking heed. Architas, the fund management arm of AXA Wealth, has overhauled the charging structure for its multi-asset passive funds

Customers who choose to invest in one of six passive funds, which range in risk from cautious to aggressive, will have to pay an initial charge of 2%, but a zero annual charge thereafter. Although there will be still be a small annual charge on the underlying tracker funds, it’s guaranteed to be no more than 0.2%, and the ongoing zero annual charge will encourage investors to hold for the long term and reward those who do so. 

Sensible Investing isn’t here to offer financial advice, still less to recommend specific funds, so this emphatically is not an endorsement of these particular funds. But Architas deserves congratulating on the step it’s taken, and other fund managers should follow its lead. 

Just as banks and building societies reward savers for holding back on withdrawing their cash, so fund managers should incentivise investors to resist the temptation to bail out when the markets take fright, as they inevitably will. 

Staying the course is patently good for the investor - as that most famous of all investors, Warren Buffett, keeps reminding us. 

Because we’re human, we’re prone instead to cash in our chips when fearful, then pile in again when all seems rosy. Over the years, this over-trading ends up costing us a small fortune in charges. It’s far better to keep trading costs to a minimum, ride out the storms, and reap the rewards that patience invariably delivers. 

But taking a long-term perspective would surely benefit the industry too. Fund managers wouldn’t be giving themselves ulcers by chasing the short-term performance their bonuses depend on, and their employers would be spared the hassle and expense of the constant hiring and firing the system entails.

And, instead of continual fire-fighting, financial advisers could concentrate on getting to their know customers better and giving them the successful investing experience they deserve. 

Barring the brokers, long-term investing benefits everyone. So, well done, Architas, and let’s have more of the same, please.

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