Getting an extensive view of the fees charged on your investments turns out to be very complex and painful. Indeed, fees are poorly or not communicated by financial advisors, fragmented and spread over several reports, or simply hidden when regulation allows it. Easyvest strives here to shed light on the foggy fees of Belgian banks’ funds.
What are the fees charged by funds of major Belgian banks? What hides behind visible fees? Are these high fees? What are the most competitive funds? To answer these questions, we studied the cost structure of the 21 best funds of traditional Belgian banks. After having analysed the performance and the risk of these funds, we dug into their annual reports and those of their sub-funds to determine the fees they actually charge.
The funds of traditional Belgian banks charge an average of 4.5% during the first year of an investment, or 5 times more than easyvest. These costs include entry fees, ongoing fees of funds and their sub-funds, but exclude taxes. Before covering all these costs, a portfolio will need to generate a solid return.
Before you can even make your money grow, you have to pay an entry fee to the fund. This fee of 2.5 % on average is actually a distribution fee that is usually retroceded to the adviser who sold you the fund. This is a historic but ethically questionable practice which is not applied at easyvest. Note that in some cases the entry fee can be negotiated with your advisor.
The ongoing fees of the funds studied here vary widely, from 1,1% to 2,2 %. These ongoing charges are the tip of the iceberg. They cover the management, administration, marketing, custody and audit of funds. European managers have the obligation to fully disclose those fees in the factsheet of the funds.
Moreover, many of the surveyed funds invest partially or exclusively in other funds of the bank, charging additional management fees. The investor finds himself unwittingly with a double layer of fees that is not communicated and it is very difficult to identify. On average, the fees of these sub-funds add 0,5% to the fees of the primary funds, but in some cases they represent 1,6% of additional costs. It is true not all funds invest in other funds, but it is still very common and we analyzed 425 sub-funds as part of this study.
Some fees are not subject to any disclosure. This is the case of fees related to transactions executed within the funds. They are directly included in the purchase price of fund’s positions and invisible to the investor. Depending on the volume of transactions, they oscillate between 0,2% and 1% per year.
The above fees include VAT but do not include the financial taxes. These include a tax on transactions (1,32 % at sale) and a withholding tax on the allocation to bonds (27% of the capital gain at sale). The tax on speculation is not applicable to these funds. easyvest portfolios are subject to a tax of 0,27 % on each transaction, and a withholding tax of 27% on the bonds appreciation.
We observe differences between the retail banks and private banks, the latter charging lower fees on average. Note, however, that private banks do not generally accept investment below 250.000€ and frequently charge a depositary, advisory and other miscellaneous fees in addition to the fees of their funds.
To sum it up, an investor subscribing to a fund studied here believes he will be charged 1,5% but ends up paying 4,5% during the first year on average. Meanwhile, a regular account at easyvest will enjoy a total fee of only 0.9% per year, all expenses included. No funny surprise with easyvest, fees charged are clearly detailed right from the start when you register on our platform before any sort of commitment.
You want to know exactly how much you pay for your current investment portfolio and assess its performance? easyvest performs free portfolio audits based on a simple portfolio statement. We will provide you an infographic detailing your current asset allocation, risk of loss, total costs, and a simulation of the historical performance of your portfolio. Interested? Contact us by email.
Note: This article was written when Easyvest was authorized and regulated by the FSMA as an agent in banking and investment services.