The Silent Eroder: How Ongoing Charges Impact Your Portfolio Growth

24th November 2023
In the world of financial advice, especially for expats navigating overseas markets, the topic of charges is often shrouded in mystery. However, at Brigantia Private Wealth Management, we believe in transparency and cost efficiency, and we want to shed light on the significant impact of ongoing charges on your portfolio growth.
The Industry's Ongoing Charges Issue

Before delving into the specifics, it's crucial to understand that the financial advice industry, particularly in overseas markets, has grappled with high charging solutions. When taking all ongoing costs together (product costs, advice costs and investment management costs), some investment products come with fees soaring close to 4% or even higher, significantly eroding your potential returns. At Brigantia, we are committed to keeping total ongoing costs as low as possible.

A Tale of Two Scenarios

To illustrate the profound effect of ongoing charges on your investment growth, let's consider two scenarios. In both cases, we assume a pre-charge growth rate of 8%. The first scenario involves a client who invests £2,000 per month for a capital need in 15 years.

  • In a high charging solution with fees of 3%, the client's investment reaches just over £535,000.
  • In a low charging solution with fees of 1.5% (still higher than our preference at Brigantia), the client's investment grows to just over £610,000.
That's a staggering £75,000 difference in favour of the low charging solution, even though the growth rate before charges remained the same. When factoring in the eroding effect of inflation, which we’ve ignored in these comparisons, the importance of focusing on costs becomes even more apparent.
In practical terms, if a client's goal is to amass £500,000 in 15 years, they would need to invest £1,860 per month in a high charging solution compared to just £1,635 per month in a low charging solution. That's £225 per month saved while working towards the same target!

The Lump Sum Dilemma

Now, let's turn our attention to a lump sum of £250,000 invested for 15 years.
  • In a high charging solution with fees of 3%, the investment grows to just over £528,000.
  • In a low charging solution with fees of 1.5%, the investment soars past £660,000.
Here, the disparity is even more striking, with the low charging solution yielding an additional £132,000 in growth that hasn't been eroded by ongoing charges.

For higher net worth investors, these percentage differences in charges can translate into even more eye-watering sums, further underlining the importance of cost-conscious investing.

Real-World Impact

These numbers aren't just figures on a page. They represent the real-world effects of ongoing charges on your life and your financial goals. The money saved from lower charges could mean better opportunities for your children's education, an earlier retirement, or an improved quality of life.

At Brigantia, we are dedicated to ensuring that your money stays in your pocket, where it belongs. Our laser focus on costs and smart investing decisions is a testament to our commitment to securing your financial future.

In a world where every pound, dollar, or euro counts, trust Brigantia to guide you towards a brighter financial future with the impact of your money where it matters most—your life.