TRADITIONAL COST MEASURES
Traditionally, collective investment schemes (unit trust funds and exchange traded funds) have used the total expense ratio (TER) to reflect costs, while life assurance companies have used the reduction in yield (RiY) on their investment products. Both are expressed as a percentage, per year, of your total investment value.
• TER: reflects annual asset management fees, including any performance fees, as a percentage of your investment.
• RiY: shows the effect of costs as an erosion of value, or a reduction in the annual yield or return over a fixed term.
Neither measure fully discloses all the potential costs, and the RiY uses assumptions that could prove to be incorrect.