Transparency first: How W1M simplifies total cost for advisers and clients

Understanding investment management’s total cost to client is becoming increasingly complex. With performance aggregators and comparators like Mabel Insights, Morningstar, FE Analytics and Defaqto, advisers and paraplanners are faced with a myriad of options and considerations for client recommendations, however, these can be murky waters…

Net apples and gross oranges…

The use of performance aggregators and comparators often presents challenges in terms of clarity and consistency, with some showing performance gross of fees, some net of fees, and some net of all but transaction costs. Needless to say, the lack of standardised metrics can make it difficult for advisers and their clients to make like-for-like comparisons and to assess the true value and cost of different investment strategies.

The allure of headline fees…

Many MPS disrupters often emphasise their low MPS charges, sometimes as low as 10 bps. Whilst obviously attractive, we would argue that it's essential for advisers to look beyond headline figures and consider all associated costs, including the additional layer of third-party fund fees and transaction costs.

The need for consistency

MPS and Multi-Asset Fund (MAF) factsheets, which should provide a clear breakdown of costs and performance, often lack consistency across providers. This inconsistency makes it difficult to compare options and communicate costs effectively to clients.

To make matters more complicated, disclosure requirements for MPS and MAFs are not the same, despite the overlap in use by advisers and clients. MAFs do not need to disclose transaction costs on factsheets. While we adhere to the industry standard in this regard, W1M disclose total costs in our ‘Technical Notes’ documents. These are available on request.

Warts & All

W1M MPS factsheets disclose total costs, as broken down in the Figure 1. W1M MAF factsheets disclose OCF, as per the industry standard.

When looking at a range of providers, W1M’s 0.40% management charge may stand out, however, it is crucial to look at comparisons on a like-for-like basis. At W1M we don’t charge a separate DFM fee. We also do not outsource our asset selection, using a predominantly direct approach to our underlying holdings rather than investing in third-party funds, which ensures an extremely competitive total cost for a truly active solution.

Figure 1: W1M MPS total costs

Source: W1M. The source is the latest European MIFID Template (EMT) for the transaction costs and the December’s OCFs for the underlying costs. The costs represent the total expenses of each fund within the portfolio including the costs of any underlying holdings and administration charges. The costs do not allow for platform charges such as platform trading charges. Portfolio asset allocation is based on the tactical asset allocation of each model portfolio.

Figure 2: W1M Multi-Asset Funds total costs

Source: W1M. The source is the latest European MIFID Template (EMT) for the transaction costs and the December’s OCFs for the underlying costs. The costs represent the total expenses of each fund within the portfolio including the costs of any underlying holdings and administration charges. The costs do not allow for platform charges such as platform trading charges. Portfolio asset allocation is based on the tactical asset allocation of each model portfolio.

For advisers, this means they only need to add their own advisory fee and the platform charge to the total client cost, simplifying the pricing structure and enhancing transparency.

Key Benefits of W1M’s Transparent Charging Model:

• No DFM charge: We believe this eliminates a layer of cost that clients often encounter with other providers.
• Minimal Third-Party Funds: Our direct investment style reduces the complexity and potential costs associated with outsourcing to multiple managers.
• Competitive Pricing: Offers an attractive option for clients seeking active investment management without the higher costs typically associated with it.