Where we manage client investments on a Discretionary Managed basis, or else have custody of their investments, at least once a year we are required by regulation to provide an aggregated disclosure of the costs associated with their portfolios.
The requirement was introduced by the European Union’s Markets in Financial Instruments Directive (MiFID II) regulation, which came into force on 3 January 2018. Investment firms are now obliged to make the disclosure at least annually, starting in 2019.
This disclosure will be based on the actual total costs incurred during the last 12-month rolling period. The information is expressed in both monetary and percentage terms, and shows the cumulative effect of costs and charges on your portfolio’s annual return (or if shorter, the period the portfolio has been with Charles Stanley).
Actually incurred costs
The following constitutes the total charges incurred by your investment portfolio that we are required to disclose:
- Charles Stanley fees: our annual management/service charge, inclusive of VAT where applicable.
- Charles Stanley transaction charges: where applicable, commission charged for trades.
- Third party transaction charges: these are sums that Charles Stanley collects but does not retain - for example, any stamp duty where applicable.
- Underlying product costs: the costs charged by the providers of any investment products held within your portfolio during the reporting period.
- Third party payments received by Charles Stanley (product commission): where an investment firm receives payment from a product provider, they will be shown here. For comparability purposes firms are obliged to show this line in the report, even where it is expected to be zero.
- Customer agreed remuneration (CAR) payments to third parties: where you have authorised us to make one-off or ongoing payments from your portfolio to a third party, such as a financial adviser, these are included in the disclosure.
Product costs
Investments can be broadly divided into ‘direct’ investments (shares issued by companies, bonds and so on) and ‘indirect’ investments, sometimes referred to as ‘collective investments’, ‘pooled investments’ or ‘products’; these would include unit trusts and OEICs, investment trusts and exchange-traded funds (ETFs).
Direct investments do not typically incur any internal costs of their own, however products will do so, with their costs being made up of a number of components that, when totalled, show the total charges figure associated with holding that investment product. These components are:
- One-off charges: where applicable, any entry and exit costs charged by the product on a purchase or sale of the product.
- Ongoing charges figure (OCF): the charges related to the ongoing management of the product by the provider (or other parties), deducted from the product during the period the investment is held, examples being management fees and service costs.
- Transaction costs: incurred by the product as a result of the purchase and disposal of investments within the product, for example broker commissions and stamp duty.
- Incidental costs: where applicable, any performance fees or ‘carried interest’ charged by the product provider during the period.
Examples
The following examples are set out below to illustrate how an investment product’s charges might be comprised. The information is illustrative, since each investment product will naturally have its own different charges, with the results that some products may have total charges significantly higher or lower than those shown on the right.
BNY Mellon Global Income Fund U Shares Income
| Product costs | Value (%) |
|---|
| One-off charges | 0.00 |
| Ongoing charges figure (OCF) | 0.70 |
| Transaction costs | 0.00 |
| Incidental costs | 0.00 |
Total product costs | 0.70 |
Polar Capital Technology Trust plc
| Product costs | Value (%) |
|---|
| One-off charges | 0.00 |
| Ongoing charges figure (OCF) | 1.02 |
| Transaction costs | 0.43 |
| Incidental costs | 0.38 |
Total product costs | 1.83 |
The examples above use historical figures (from August 2021) based on actual fees charged in the prior reporting period. Your quarterly investment report will use such data to show the total charges figure for any investment products held within your portfolio, over the specified reporting period.
Please note that an investment product’s pre-sale disclosure of its costs, for example through its literature, may differ to those actually incurred over the course of a year.