What are the costs for wealth management?

Having your wealths managed sounds convenient, but what does it cost? Wealth management costs vary enormously between providers. And it is not just about that single percentage you see. There are often hidden costs that you only notice if you look closely. The difference can amount to tens of thousands of pounds over the years.

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Which wealth management costs do you always pay?

Most people think they pay one fixed percentage. In reality, the costs consist of several layers. You have the management fee: the percentage of your wealths that the manager charges. In addition, you pay fund costs, also known as the TER. Active funds easily charge 0.70 to 1.50 per cent, while index funds sit between 0.05 and 0.20 per cent.

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Then there are service or platform costs, often a fixed monthly amount or an additional percentage. And do not forget transaction costs: some parties charge per purchase or sale, others hide costs in the spread. Many people pay 1 to 1.5 per cent per year in total costs without realising it.

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Why comparing wealth management costs is difficult

Providers like to communicate their lowest figure. "Management fee 0.7 per cent" sounds fine, but if fund costs, service costs, and transaction costs are added on top, you quickly end up at double that. True transparency means adding all costs together. Only then can you compare fairly.

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Pay particular attention to whether transaction costs are charged. Are there entry or exit fees? How high are the fund costs? And is there a monthly service fee? Only once you know all this will you see what you are actually paying.

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The effect of managed investing costs on your final wealth

This is where it gets interesting. A cost difference of 1 percentage point per year sounds small, but over 30 years, this leads to 25 to 30 per cent less final wealth. Costs compound just as hard as returns.

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An example: you invest €100,000 with an average return of 6 per cent per year. With 0.35 per cent in costs, this grows to approximately €540,000 in 30 years. With 1.35 per cent in costs, you are left with about €407,000.

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The difference: €133,000, caused by the annual cost difference and the compounding effect thereof.

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How Vive keeps costs low

At Vive, you pay a 0.35 per cent management fee per year and €7.50 per month for the full service. The fund costs are between 0.13 and 0.19 per cent because investments are made in market-wide index funds. There are no transaction costs, no entry fees, and no exit fees.

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Low costs do not mean less service. You get a personal lifecycle strategy, automatic rebalancing, and full insight via the app. The difference is that no expensive active fund managers or unnecessary intermediaries are involved.

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Want to know how this fits your situation? View the options for pensions for the self-employed or download the brochure for freelancers and directors.