How to double your returns? Don’t give half of them away

There needs to be more transparency in the investment market, says chief executive and co-founder of evestor Anthony Morrow.

Some headlines about investment returns sound implausible. That’s because they probably are. A magic bond that offers 20 per cent annually probably offers that kind of gross yield because it comes with high risk – and that ‘guaranteed’ 15 per cent return on a holiday home in Cyprus probably isn’t for real.

There are clear benefits to seeking independent, regulated financial advice when it comes to investing. Financial advice can help you decide where to invest your capital based on your level of risk, as well as providing valuable insight into the state of the market.

But, what if you could get all these benefits at a cheaper cost? What if there’s an alternative to traditional financial advice that produces the same outcomes at a fraction of the cost?

Whether you’re a new or experienced investor, the simple maths of minimising fees beats any clever fund manager. For anyone looking to maximise their returns, the answer is simple. Don’t give away half of your capital by paying overpriced fees.

According to the Financial Conduct Authority’s (FCA) asset management market study, far too many investors are giving away half their returns to middlemen (up to 2.5 per cent for the privilege of a 5 per cent return). Luckily, there’s cheaper alternatives in the market. Some robo-advisers charge as little as 0.5 per cent for all-in fees.

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To put this into perspective, by paying 0.5 per cent instead of 2.5 per cent per year in fees, you could save hundreds of pounds. In real-time terms, this could mean retiring five years earlier, buying a new car or paying for a holiday of a lifetime.

The problem is, not everyone knows about it. As the FCA’s management market study states, investors could be spending their hard-earned cash on costly financial advisers, without realising there’s cheaper options available.

The same FCA report also highlighted the lack of competition, high margins and opaque charging structures. As a result, the FCA plans to review the investment market and the financial advice available for customers, with the aim of ensuring financial advisers are offering the best value for money for customers.

It’s clear there needs to be more transparency in the investment market. The harsh reality is that without stricter guidelines, it’s the everyday investors that put their capital at risk. It’s people’s hard-earned savings that are falling into the pockets of fund managers, without necessarily realising the cheaper options available. 

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