[TOP STORY] Are you really paying ‘no fees’ when investing?

Some people attempt to pretend they’re charging zero fees, but all the other layers are still there: Fedgroup COO Michael Field.

SIMON BROWN: I’m joined now by Michael Field, COO and head of investments at Fedgroup. Michael, I appreciate the early morning time.  I’ll say in the intro [that] fees do matter because in the simplest sense a fee that I’m paying is money leaving my pocket. And, if I’m looking at an investment, it’s money leaving my future pocket as well. And they can hurt if they’re too big.

MICHAEL FIELD: Absolutely. Good  morning, Simon. Yes, I think this is something we see a lot. The fees are there, there are layers of them, there are too many of them. As you point out, it’s one hundred percent eating into the returns that a customer’s trying to achieve, struggling to achieve in current times.

SIMON BROWN: Yeah. I take your point, particularly about that layer of fees as well. I’ve seen places where there’s a fee to an agent, there’s a fee for the product, there’s a fee for a platform. It’s like everyone’s standing there and getting a small slice. They might be small slices, but they do quickly add up and that’s what you need to dig into. It’s not just often the sort of headline fee, you’ve got to dig behind the curtain.

MICHAEL FIELD: Yes. I think it’s exactly as you you’ve said there. Those fees continue to add up, but importantly it’s about value. Are all of those people adding value along the way for us? We’ve gone with zero fees on most of our products. It’s something we’ve done for 30 years, and for us it’s about that simplicity. But it’s also about ensuring the client gets what has been committed to. I think this is also so important: what is the client’s expectation, has that been met, and is that in line with what they should reasonably be expecting? Are they having to dig too deep to find out what this product is really doing?

Investment structures are not inherently complex. I think a lot of the complexity we see has been designed in by providers trying to hide some of these things.

SIMON BROWN: I agree with that statement a hundred percent. At the end of the day these products are often – but mostly not – complex; they’re made complex so that I need to go and find an expert to help me with it. I agree a hundred percent on that.

You mentioned zero fees. How does that work? If we look at Fedgroup, obviously you’ve got costs. In the product there needs to be some profit for the group to pay salaries and bills.

MICHAEL FIELD: Of course. We are a business. I think it comes down to whether the investors themselves need to be paying those fees. So, importantly for us, we’re not just a delivery man. We’re not just taking the funds from an investor and passing it out the back and expecting a hefty fee for it. For us it’s important to be part of adding that value. And in that way we would earn our portion of income off the back of where we are adding value, a simple example being when we deploy it into a commercial bond, that person taking on a bond would pay us fees, the investor…..3:29.

For us, it’s important that it remains really simple and that they understand what they’re getting. For us the easiest way to do that is to have a genuine zero fee. I say ‘genuine’ because we’ve seen some people attempt to pretend they’re charging zero fees. They might say ‘zero administration fees’, but all the other layers are still there.

SIMON BROWN: I’ve chatted with your CEO before, Grant [Field]. I remember talking in particular about your impact farming. It was about the bees – and you’ve got little micro computers in there. I was talking about, oh, is it an Adreno or a Raspberry Pi? He laughed. He said no, those are expensive. My sense is it needs to be built into the DNA of the company.

MICHAEL FIELD: A hundred percent. And this is where I use the analogy of ‘are you the delivery person?’ – no disrespect to delivery. We all have our online shopping. But it’s about being a broad enough piece of the value chain. And for us that’s critical and has been since day one, 32 years ago. Our very first product launched with zero fees and still does to this day. As you point out, you cannot achieve that unless it is throughout the organisation, throughout the product design, throughout everything you do as a business. You have to be built for it.

SIMON BROWN: Yes. And that’s why I suspect some of the French institutions out there with hundreds of years of history. That’s nice and all, but their DNA is not about low fee. They absolutely struggle with that. But I particularly point it’s around the value, it’s around what you’re getting for it. And that’s always a hugely important.

Michael field, CEO and head of investments at Fedgroup, I appreciate the early morning time.

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