𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

Millions of UK investors are still struggling to understand how much they pay to invest despite years of regulatory reforms aimed at making fees more transparent, the City watchdog has warned.

A review by the Financial Conduct Authority (FCA) found that almost one in three (30 per cent) people using investment platforms without financial advice do not know what they are being charged.

The regulator also found that pre-sale investment documents remain difficult for many consumers to understand. Of the 132 disclosure documents it assessed for readability, only 6 per cent were written in plain English, with every document requiring a reading level above GCSE standard.

The last few years has seen the rise of lower-cost providers, but campaigners say much more needs to be done.

These findings come as the FCA pushes the investment industry to simplify disclosures and make it easier for consumers to compare charges before investing.

Campaigners say the lack of transparency means many savers underestimate how much fees can erode long-term returns.

Gina Miller, co-founder of investment manager SCM Direct, said: “It’s been more than a decade since the Retail Distribution Review, and it’s shameful that investors still can’t see what they’re really paying when they invest. That isn’t complexity – it’s a choice.”

She called on the FCA to introduce a standardised label, like there is for food, that would allow consumers to compare investment costs more easily before committing their money.

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The impact of charges can be substantial over time because fees are deducted year after year, reducing the amount left to benefit from compound growth.

SCM Direct estimates that someone investing a £50,000 lump sum earning 5 per cent a year before charges would see the pot grow to around £81,400 after a decade if there were no fees. Under what the firm describes as a typical all-in annual charge of 2 per cent, the investment would instead be worth about £67,200 – a difference of roughly £14,000.

The wider investment industry disputes that 2 per cent is representative of what most customers pay.

SCM argues that while investors may focus on a headline management fee of around 1 per cent, additional costs – including underlying fund charges, transaction costs and platform fees – can push the total annual cost closer to 2 per cent.

Annabel Brodie-Smith, communications director at the Association of Investment Companies, welcomed the FCA’s proposals.

“We strongly welcome the FCA’s proposals. This is a win for consumers and investment trusts,” she said. “Consumers will have helpful cost information so they can make better investment decisions.”

Sam Christopher, proposition director at wealth manager Quilter, said charging transparency had improved significantly over the past decade following regulatory reforms including the Retail Distribution Review and the FCA’s Consumer Duty.

“The main objective should be ensuring consumers can make informed decisions based on both price and value,” she said.

The FCA is consulting on proposals to simplify investment disclosures, including using clearer language and presenting charges in a more consistent format, as part of wider efforts to help consumers better understand the true cost of investing.