Last week the Supreme Court made a hugely influential ruling in a test case regarding bank charges on unauthorised overdrafts. The court decided to overturn earlier court rulings that had led to customers being able to reclaim ´unfairâ€˜ charges. The Office of Fair Trading has vowed to continue fighting the banks by exploring other avenues such as a Competition Commission enquiry.
It was estimated that the decision had some £2.6 billion of annual revenue resting in its hands. Revenue the banks can now look forward to retaining.
However a potentially larger pot that another much criticised industry enjoys each and every year is that of the investment management industry. Insurance companies and investment houses charge management fees on products such as pensions, unit trusts and ISAs that put bank charges into the minor leagues.
Investor Profile director Jaskarn Pawar said Ã¢â‚¬Å“the charges are high, we know that, but whatâ€˜s more concerning is that the customer knows nothing about them. Where else do you get to pay £20 per month for a product or service that you barely even know about?Ã¢â‚¬.
Ã¢â‚¬Å“Investment and insurance companies make their bread and butter from systematically imposing annual management charges on the products and funds their customers own.Ã¢â‚¬ he said.
In a similar scenario to the bank charges, these investment fees are justified by supposed administration costs. However the argument from the consumer is that they are out of proportion to the administration required.
It is estimated that on an investment (e.g. ISA or unit trusts) of £10,000 you would be expected to pay up to £250 or more per annum to your investment company. Thatâ€˜s over £20pm for the pleasure of just holding your investments with the fund manager. Is that unfair?
And for all of that you may well end up with a fund that returns less than the market would, or at least less than many of its competitors. So for a handsome fee the fund manager does not even promise any sort of guarantee of return.
The really bad news is that pension providers will most likely be charging more than this. Thatâ€˜s because they charge not only for the funds you are invested in but also the product itself. So they charge an administration fee for running the investments, then an extra fee for administering the product.
If you want it to get even worse then some insurance company products, like endowments, are so deliberately complicated that the fees are not even disclosed.
So what can you do? Well the Daily Mail already has a campaign running that it calls the Ã¢â‚¬Å“War on ChargesÃ¢â‚¬. This is a worthy battle and one very much worth winning.
In the meantime itâ€˜s worth getting some expert help. If you are stuck paying these high charges, which you will be if you hold any sort of ISA, Personal Pension, or Unit Trust investments, then the least you can do is make sure you get an excellent service for your money.
It is unlikely that you current manager will provide this. Therefore you will need to take up the services of a specialist company. Investor Profile is one such company. Its Easy Viewer Portfolio service is paid for by the product providers so that you can take advantage of the online services at no extra cost.
Jaskarn Pawar of Investor Profile said Ã¢â‚¬Å“our Easy Viewer Portfolio service allows the customer to enjoy a far greater range of benefits without the need to move their investments, spend any money or fill in any complicated formsÃ¢â‚¬.
More information can be found on the Investor Profile website at http://www.investorprofile.co.uk
As for the investment charges well they will continue until there is enough pressure on the providers to reduce them. However as we have seen with banks, large financial services institutions are incredibly resilient and will fight tooth and nail to hold on to their income streams.