Money Matters

Estate agents charge the same percentage fee to sell £250,000 houses as they charge for £1 million-homes, even though there is little, if any, extra work involved. With a fee of 2 per cent, that is an extra £15,000 in their pockets – for nothing.

You can understand why they like charging percentages rather than fixed prices or hourly fees.

The highly profitable investment industry is another that (nearly always) charges you a percentage of the amount of money you give them to look after. Until January this year, most fund managers also kept hidden from you the substantial additional fees they deducted from your savings every year without your knowledge.

This changed when new EU rules, called Mifid II, forced fund managers to reveal these previously undisclosed transaction costs and to make sure that clients understood how much they were paying. These are fees that investors have, without realising, always paid on top of the quoted base figure – known as the ongoing charges figure (OCF).

An investment consultancy called The Lang Cat analysed the twenty top-selling funds and found that, on average, investors were paying 30 per cent more than they thought and some were paying as much as 85 per cent more. One fund had told clients they paid 0.78 per cent of their investment, when they were really paying 1.44 per cent every year.