Client Alert
Mirror mirror on the wall what are the most
expensive funds of them all?
Many years ago before the invention of wraps and platforms you had to use Insurance Company’s own funds
in order to build your portfolio. The more ‘forward thinking’ Insurance Companies then negotiated deals with
popular and better performing fund managers to incorporate some of their funds in their own suite of funds.
You might think a logical step would have been to use the existing fund but the Insurance Company did not
want to use the existing fund as it did not ‘build in’ any profit margin for the Insurance Company. Thus the
mischief of ‘Mirror Funds’ was born. These were funds that were effectively the same in terms of underlying
investments but different in terms of charges with each fund having its own specific charging structure.
Being independent enables us to compare the ‘whole of the market.’ So, as an example of how this works
in practice we analysed the BlackRock Gold & General Fund as it has a long term track record and has
performed well. This fund has also been mirrored by the Life assurance companies below who all offer their
own version of the fund:
We compared the actual fund (non-mirrored such as the one you can buy on any good independent platform)
against the Skandia and Winterthur version of the same fund and looked at annual returns over 10 years.
Broadly speaking over 10 years the Skandia version costs an extra 1% per annum in return and the Winterthur
2% per annum. Assuming that a client did hold these funds for 10 years and invested £100,000 the difference
in returns is staggering:
Humphries Kirk Financial Services
T: 01202 874202 E: [email protected] W: www.humphrieskirkfinancialservices.co.uk
• The actual fund produced 25.54% per annum for 10 years = • The Skandia version produced 23.54% =
• The Winterthur version produced 22.54%
=
£774,531*
£720,741*
£670,298*
We would therefore urge any client to ‘separate out’ their adviser charges, from their wrap/platform offering and fund manager charges.
This way you can always remove one element if it is underperforming. This also encourages all the parties
concerned to provide the highest levels of service for the most competitive costs. We still see many clients
today that are under the impression that their wrap or adviser charges nothing. We would urge them to look
closer at the ‘mirrored fund’ or fund rebates that are not being credited back to them. After all we all know in
our heart of hearts that nothing in the world of investments is free.
*Investment analysis sourced using Morningstar and the same fund over a 10 year period.
This article is provided for information purposes only and is not an invitation to invest. Nothing in this
article should be regarded as constituting investment or financial advice and prospective investors are
advised to consult professional advisers before contemplating any investment.
Humphries Kirk Financial Services Ltd is an appointed representative of Ward Goodman Financial Services
Ltd who are authorised and regulated by the Financial Services Authority.
Contact
HK Financial Advice Services
Director Simon Willcox
T: 01202 874202
E: [email protected]
W: www.humphrieskirkfinancialservices.co.uk