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New investment calculator to show ‘true and fair’ cost of funds

Tahmina Mannan
Written By:
Tahmina Mannan

A free online calculator has been launched to ’empower’ investors and savers by revealing the impact of costs and fees on their investments.

The calculator has been created by the True and Fair Campaign, a not-for-profit organisation, founded to ‘revolutionise cost transparency in the investment world’ by highlighting just how much fees and charges can eat into an investor’s pot of money.

The calculator – the first of its kind in the UK, according to the campaign’s founders – highlights the full effect of charges and other costs on investment returns, in pounds and pence as well as a percentage.

The Calculator:

• Enables investors to fully analyse the total costs of all investment products available in the home country, e.g. in the UK.

• Has two levels – Standard and Advanced Bespoke – both levels can be tailored but the Advanced level allows more sophisticated and professional users, such as advisers, consultants and trustees to enter data at every level of the investment chain – fund costs, wrapper costs, platform costs and adviser costs.

• Gives the user one total cost of investing number, in pounds and pence, as well as a percentage.

• Allows users to compare up to three completely different products, side-by-side, for example a Unit Trust, an ETF and an Investment Trust.

The Calculator uses the Reduction in Yield (RIY) method which calculates the overall effect of charges on an investment as the difference between the return you would have received with and without costs.

Gina Miller of The True and Fair Campaign said: “We’ve created the True and Fair Calculator to provide UK consumers with a free public information service giving details of the investment fees and costs they pay, so they can make better informed decisions prior to purchase.

“When we launched The True and Fair Campaign 18 months ago, 92% of the public said they wanted to know the cost of their investments in one number. This tool allows them to do exactly this.

“We hope this drives new levels of cost transparency which results in greater competition among product providers, gives information to aid better decision making by consumers and their advisers and provides a foundation for more realistic investment expectations. Ultimately it should result in better consumer protection.”

A similar calculator has been available to US investors since 2005.

Investors can access the calculater here.