New calculator tool tells you just how much you're wasting on bank fees: "People literally gulp"

A NEW calculator tells you just how much you're wasting on bank fees while investing with people “literally gulping” at its results.

Investors relying on the big high street banks for wealth management may be paying significantly more than they need to — and not necessarily getting the performance to justify it, financial experts say.

Financial advisers report that they have recently reviewed a number of client portfolios, ranging from £500,000 to several million pounds, all managed under the big banks’ own investment arms or through joint venture partnerships. 

They claim that in almost every case, the charges were up to 1% a year higher than comparable independent or DIY solutions.

Dr Ramin Nakisa, Managing Director at PensionCraft Ltd, has created a calculator for his subscribers to work out fees for investing.

He said: "The financial industry tends to downplay the impact of fees, but they’re one of the biggest long-term risks to your portfolio. At PensionCraft, we’ve developed what we call the ‘GULP’ calculator, accessible on our website for subscribers, which is a reality check, and part of our mission to give investors the knowledge and tools they need to take control and assume a DIY investment journey. 

"For the confident investor who chooses to manage their own investment via, say a passive tracker, fees will be typically 0.15%. Our calculator clearly demonstrates the astonishing rewards of DIY investing when compared to a managed fund where charges can be anywhere between one and two percent annually. People literally gulp when they see how this difference in fees can impact a growing portfolio over the course of 10 years or more."

Scott Gallacher, Director at Leicester-based Rowley Turton, said remaining loyal to your bank could cost you money.

He added: "Several recent cases we’ve reviewed highlight just how expensive the banks’ investment services can be compared with independent alternatives. In one instance, a client stood to save around £16,000 a year in ongoing charges, and in another case the saving was £5,000. 

"And it’s not just the annual costs — we often see higher initial charges too. And of course, those costs really add up over time. Even ignoring investment growth, an extra £16,000 a year is a shocking £80,000 over five years and £160,000 over 10.

“Remaining loyal to your bank could cost you money that could otherwise go towards something life-changing, such as a house deposit for your children. As an IFA, it’s frustrating that so many people instinctively trust their bank, when in reality those banks are too often taking advantage of that loyalty.”

Eamonn Prendergast, Chartered Financial Adviser at Bromley-based Palantir Financial Planning Ltd, said there are costs that can be avoided.

He continued: "We’re increasingly seeing wealthy clients come to us from the big banks, often paying up to 1% a year more in fees than they would with an independent adviser and not getting the returns to justify it. 

"On a £1m portfolio, that’s £10,000 a year in avoidable costs, which compounded over a decade is hugely damaging to wealth. Performance has also often been underwhelming, with portfolios sitting in expensive. 

“Under Consumer Duty, firms have to demonstrate fair value and frankly, many of the bank-run models we review fall short of that benchmark. Clients assume the big names mean better, but in reality, it’s the opposite: higher costs, lower agility, and less personalisation.”