Which Country Has the Most Expensive Fund Fees?

UK fund fees look cheap relative to other countries, reflecting the implementation of RDR, which has banned advice fees from being bundled with fund expense

Muna Abu-Habsa 2 November, 2017 | 12:51PM
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Muna Abu-Habsa: We recently published the Global Fund Investor Experience report, where we’ve taken a close look at the experiences of fund investors in 25 countries across the world. We evaluated countries across four key areas which are Regulation and Taxation, Disclosure, Fees and Expenses, and Sales. Depending on how each country fared within those areas, it was then graded on a 5-point scale of Top, Above Average, Average, Below Average, and Bottom.

As evidence mounts that fees can be a crucial factor in investment performance, we weighted Fees and Expenses more heavily in 2017 than in previous editions of the report. The UK fared strongly in this area relative to other countries, reflecting the implementation of RDR, which has banned advice fees from being bundled with fund expenses. Since this has taken effect, we’ve found reported ongoing charges to have fallen in most asset classes. Overall, the UK’s grade was Above Average.

A number of other European countries, particularly France, Italy, Finland, Spain, and Belgium suffered on Fees and Expenses, pushing their overall grades down to Below Average. We expect that the impending MiFID II regulations will bring in tougher rules to protect investors and should see those European markets improve in this study.

Overall though we’ve found that there’s been widespread improvement in investor experiences across multiple markets across the globe and we think that’s been driven by globalisation, stronger regulation, and a move towards adopting best-practices. In fact, no country received the Bottom overall grade, and more than half received an overall grade of Average. Having said that, there’s still a lot of work to be done.

Although the United States remains the country with the highest grade—as it has since 2009—leading with lower expenses and a strong disclosure regime, it is still held back by a Regulation and Taxation grade that trails many markets.

We hope that this study will continue to encourage dialogue about best practices and act as a catalyst for positive change.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Muna Abu-Habsa  is a senior investment research analyst at Morningstar

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