18 Sep 2025
Fund costs can be confusing and may lack transparency. You should carefully examine all-in charges to ensure you’re not overpaying for your investments. Lumin Wealth’s Managing Director, Martin Cotter, explains more.
It’s crucial to understand the investment fees you’re being charged, as some may not be clearly disclosed or easily understood. This article breaks down the fees you might encounter in a typical investment fund.
Entry fee and total expense ratio
The first fee you might face is an entry fee, an initial fee charged by a fund. It is deducted before you invest to cover the costs of setting up your investment. These fees are becoming less common.
Typically, the largest fee you face is the total expense ratio (TER). This includes things like management (which is higher for active funds than passive), custody, valuation, and more. The TER is an annual percentage, which is deducted from your capital or income. Typically it ranges between 0.1%-1%, depending on the strategy.
Transaction costs and performance fees
Transaction costs can be baffling. This is the cost the fund incurs for buying and selling the underlying investments and is not captured by the TER. This fee can be high for complex or less liquid assets, so it’s important to understand what your underlying investments are.
Some funds may also deduct a performance fee (a common example being 10% of any outperformance of a benchmark). You should always check what the performance fee of a fund is and ensure you are comfortable with it. Remember a fund can outperform its benchmark even if the return is negative.
Platform fees
A platform fee covers the cost your provider incurs for holding your investments. Depending on your platform this could be a flat fee, or percentage of the assets invested. Discounts often apply for higher asset values.
Weigh up all-in costs
It’s vital to weigh up all-in costs, to ensure you’re not overpaying. A professional investment management team can access institutional share classes, which come with reduced fees.
Institutional fee arrangements are available for both passive and active funds.
Call 03300 564 446 to speak to a Lumin expert, or get in touch via our contact form.
