Fees warning around new LICs

fees warning LICs FOFA

24 October 2017
| By Mike |
image
image
expand image

The Future of Financial Advice (FOFA) changes have seen a growth in listed investment company (LIC) vehicles in Australia but investors need to be cautious in circumstances where fund managers have launched LICs carrying high base fees and performance fees, according to LIC specialist, Argo Investments.

Argo chair, Ian Martin said FOFA had seen the number of LICs listed on the Australian Securities Exchange (ASX) double to over 100 with the FOFA changes having levelled the playing field by abolishing conflicting commission structures in the financial planning sector.

“We note that most of the recently listed LICs are externally managed, often launched by fund managers who already offer unlisted managed funds to the public,” Martin said. “It is important to examine the structure of the fees charged by external managers to the LIC vehicles, as often they include both high base fees as well as performance fees which can limit the growth potential and performance of the LIC itself.”

The Argo chair said it was also important to be aware of differences that are emerging in the disclosure of investment performance figures among LICs.

“You need to be sure you are comparing ‘apples with apples’ when deciding on appropriate LIC investments. For example, some managers are quoting LIC performance statistics before deducting costs (including fees) and tax, and calculating their fees on the same basis,” Martin said.

He said financial advisers could help with this if disclosures were not clear.

Read more about:

AUTHOR

Recommended for you

sub-bgsidebar subscription

Never miss the latest news and developments in wealth management industry

MARKET INSIGHTS

Completely agree Peter. The definition of 'significant change is circumstances relevant to the scope of the advice' is s...

3 weeks 4 days ago

This verdict highlights something deeply wrong and rotten at the heart of the FSCP. We are witnessing a heavy-handed, op...

1 month ago

Interesting. Would be good to know the details of the StrategyOne deal....

1 month ago

Insignia Financial has confirmed it is considering a preliminary non-binding proposal received from a US private equity giant to acquire the firm. ...

1 week 3 days ago

Six of the seven listed financial advice licensees have reported positive share price growth in 2024, with AMP and Insignia successfully reversing earlier losses. ...

5 days 19 hours ago

Specialist wealth platform provider Mason Stevens has become the latest target of an acquisition as it enters a binding agreement with a leading Sydney-based private equi...

4 days 23 hours ago