More than two out of five (44 per cent) financial advisers focus on low charges when recommending investment products to clients, research by housing investment and shared equity mortgage provider Castle Trust shows.
The level of charges ranks ahead of the tax benefits and protection of capital as reasons to recommend products, according to the study among investment advisers.
The nationwide research confirms growing concern about the impact of charges on investments and the attraction of index funds – around one in five (19 per cent) of advisers say disclosing charges on actively-managed funds deters investors when compared with index or tracker funds.
Advisers are also under pressure to pick winners when they select actively-managed funds – research shows a quarter spend more than ten hours a week on the selection of investments or allocating assets and nearly half (46 per cent) would welcome help from providers on asset allocation.
Castle Trust, which offers an index tracker with no annual fees that invests in UK house prices, believes the focus on charges shows growing awareness of the impact of high fees on long term performance – a 30-year investment with a gross annual return of three per cent would show a 143 per cent return but this falls to 56 per cent if a 1.5 per cent annual charge is applied.
Sean Oldfield, chief executive officer of Castle Trust, says: “There has been a significant shift in the institutional sector from active to passive investments and this research shows investors are concerned about fees, while many intermediaries feel under pressure to deliver performance.
“The UK housing market has provided excellent risk-adjusted returns over the years but these returns have generally only been available to people buying investment properties. Our HouSA allows many more people than ever before to invest in the UK housing market in a way that is easy to understand and accessible. It is also appealing to experienced investors who are looking to diversify their investment portfolio.”
The Castle Trust Income HouSA tracks the Halifax House Price Index and also pays an annual income of between two per cent and three per cent, depending on the term of the investment. The Castle Trust Growth HouSA offers a multiple of between 1.25 times and 1.7 times any increase on the Halifax House Price Index, and limits the loss to between 0.75 times and 0.3 times any decline.
HouSAs offer returns which are better than the Halifax House Price Index and protection against a fall in the Halifax House Price Index and are available for terms of three, five or ten years. Customers can invest from as little as GBP1,000 and HouSAs qualify for inclusion in ISAs, Junior ISAs and SIPPs.
