I have already queried this with II
@grimespjm further digging shows it is a good question: which fund costs are missing from the TER?
There are some costs not included in the TER, such as transaction costs for buying and selling shares. So, a fund with a 0.05% TER but with 0.04% transaction costs on top will lag the market performance by 0.09%, plus any platform fees and purchase/sale spreads.
JustETF has an article about it, see link
TER vs TCO
For SPXP, the extra 0.04% charge is explained in the Factsheet, see link
SPXP Factsheet
it is a ‘synthetic’ ETF and the 0.04% charge is being paid to the counterparties for their services.
I had a similar Costs and Charges Report from Fidelity (where I transferred from) with a surprisingly-large percentage charge, but they show their working.
The numerator in the calculation was the incurred costs and the denominator was the average account value. I transferred to IE during the year, which made the percentage number appear much larger.
So my guess would be: consider internal fund charges beyond the TER (see grimespjm’s earlier SPXP point), plus spread for purchases, calculate as a percentage of average account value for the year.
It’d be better if IE showed their working of course - was obvious for Fidelity’s Report.
Showing working is essential or it’s practically meaningless
Opened my EI account last year as wanted to buy some Vanguard ETFs, bought some more (GBDV, TDGB, ISF, DHS, SPX5, EQQQ…) and rebalanced a couple of times. My average portfolio TER is 0.16%. All of a sudden I’ve ended up with 0.87% costs and charges (0.16% ongoing charges + 0.40% transaction costs + 0.31% some other fees, not a clue = 0.87% Cumulative effect of costs and charges on return!!!
No idea what’s happening and who’s charging me these fees. Some clarification from the EI team would be very much appreciated.
Hi, thank you for getting in touch. You may find the information about charges included to the report here: What information does the Annual Costs and Charges Report include? – InvestEngine
Thank you so much @Paul_M. I see that transaction costs (commissions etc.) incur when buying or selling ETFs, but where are the specific numbers, please? 0.71% transaction / spread costs on top of the average TER for my Vanguard & iShares ETFs for a once per day bulk dealing service, seems quite steep now. The information on your website is really vague: ‘The average impact of market spread for our portfolios is 0.07% a year’ and I’m not sure if the whole exercise was worth it. Basically, I had to stay here / use your platform for 12 months in order to receive the ‘transaction cost’ information, which is still not ETF specific.
I would prefer more transparency, please. Have a good day! 