Ex-post costs and charges disclosure
Your questions answered
In 2018, our regulator introduced new rules that require investment management firms to provide more information about the costs and charges that apply to certain securities. This drive for greater transparency is actively supported by ii as openness is an important factor in building trust between firms and their clients and helps maintain an appropriate focus on costs.
ii has made available an example statement that will tell you about the costs and charges borne by yourself with regard to the management and administration of your investments and the impact they have had on their performance.
Committed to transparency and improved communication
We believe that providing greater transparency on costs is a positive step for you and the wealth management industry. It means that you can better understand all of the costs that are associated with some of your securities and the impact they have on investment performance.
What is it?
- What is an ex-post costs and charges disclosure?
- What is the purpose of an ex-post costs and charges disclosure?
- What is the difference between an ex-ante costs and charges report and an ex-post costs and charges report?
What does it look like and when is it happening?
- How will the costs and charges be presented?
- How will I receive my ex-post costs and charges report?
- What investments will I receive information for?
What about the numbers?
- What costs and charges need to be disclosed?
- What are product manufacturers and distributors?
- Are there any other costs and charges that are excluded?
- Is VAT included in the figures?
- How have we sourced the data for your ex costs and charges disclosure?
- Further information in respect of manufacturer costs and charges.
- Why haven’t I seen the product manufacturers costs before or on my statement?
- Why don’t the figures balance to what I was expecting to see?
- Why are there Negative Costs?
- Why are my Government charges figures so high?
- Are my tax rebates included in these calculations?
What is it?
What is an ex-post costs and charges disclosure?
In line with MiFID II regulation, Retail Brokers such as ii are obliged to provide clients annually with information about the actual costs and charges incurred on some of their securities. The provision of this information is known as an ‘ex-post costs and charges disclosure’.
What is the purpose of an ex-post costs and charges disclosure?
An ex-post costs and charges disclosure is all about providing costs and charges incurred from trading or holding certain investments. The Regulator’s intention is to direct the industry to be transparent with customers which ii fully endorses.
What is the difference between an ex-ante costs and charges report and an ex-post costs and charges report?
An ex-ante costs and charges report is a reasonable estimate of costs before they are incurred, whereas an ex-post costs and charges report discloses the actual costs after they have been incurred within a portfolio.
From the 3 January 2018, we have been obliged to provide an ex-ante report, known as a cost disclosure, ahead of placing an order with ii to enable you to be fully informed about the potential costs of committing to a transaction.
What does it look like and when is it happening?
How are the costs presented?
Please see the example provided and notes on what key figures are and how they have been calculated.
How will I receive my ex-post costs and charges report?
Notifications will be sent via your chosen method of communication and your documents will be uploaded to your account.
To view your documents:
- Log in
- Click the person icon and then select 'Manage Profile'
- Select 'Document history'
- Choose ‘Cost Disclosures’ from the document-type menu (under filter criteria)
What investments will I receive information for?
Costs and charges information will be provided at financial instrument level. We provide information for instruments in line with the regulations which include Funds, ETFs & Investment Trusts. A statement will be provided for each one of these investments you have held during the year.
We will not be producing documents for Equities & Defunct Stock. We do not produce a cost disclosure for Company Warrants unless there has been a trade in the year. This is because there will have been no costs incurred and therefore no impact to the investment value.
What about the numbers?
What costs and charges need to be disclosed?
Information needs to be provided about all costs and charges incurred by investors for trading and holding certain investments. This includes ii’s costs, product manufacturers’ costs and all other costs and charges associated with the investment. Other costs and charges include Stamp Duty, and tax on dividends.
Are there any other costs and charges that are excluded?
Yes. The regulation is only concerned with the costs associated with the provision of the investment services. Although ii levies charges for services such as our monthly charges, Clearing House Automated Payment System (CHAPS) fees and debit interest, these are not included within the ex-post costs disclosure.
How have we sourced the data for your ex costs and charges disclosure?
- Where available, ii has calculated the figures based on the information that is available to us from our data supplier Morningstar, that they obtain from the manufacturer of each investment. This data will be taken at a snapshot in time when the disclosures are created.
- In some cases, this data does not cover all of calendar year and in these cases the cost that is available for part of the year has been used for the full year.
- Where we do not have post sale costs, we have used pre-sales costs.
- In the absence of the above costs, we have sourced data from the associate KIID/KID documents for the instrument.
- If they are still unavailable, we have sourced the information from other instrument documentation or data providers.
- In a very small number of cases, we have been unable to source data from Morningstar or directly from the manufacturers. In these scenarios we have used a proxy based upon a sector average of similar instruments.
Further information in respect of manufacturer costs and charges.
a. Product manufacturers provide an ‘effective from’ date alongside the % cost to be applied. These ‘effective from’ dates vary depending on the product manufacturer. To be able to meet the requirement to provide an illustration for the whole year, we have assumed that the most recently submitted rates should be applied to the whole of the year and we have based our calculation on this assumption. The effect of this is that, in some cases, we are effectively providing you with an estimate for part of the year. In general, we do not consider that this estimate will differ materially from the actual figures.
b. Non European Union manufacturers have no obligation to comply with the MiFID II regulation. As such data has been sourced on a best endeavours basis using published information.
c. In relation to Real Estate Investment Trusts (REITS) only those classified as Alternative Investment Funds are captured under the new rules.
In a very small number of cases, we have been unable to source data from Morningstar or directly from the manufacturers. In these scenarios we have used a proxy based upon a sector average of similar instruments. It is also worth noting that some REIT’s fall outside of the PRIP’s regulations so will not have charges to populate a post sales cost disclosure.
Why haven’t I seen the product manufacturers costs before or on my statement?
The product manufacturer’s costs are charged and taken directly from the investment. One of the reasons for this regulatory change was to increase customers understanding of the charges they were paying, therefore enabling investors to make informed decisions. These charges will often be based on the products net asset value and will be factored into the value of your investment. Unlike ii’s transactional charges, these will not be shown on your account statement.
The product manufacturer charges are detailed in the investment key investor information document or other online literature where applicable.
Why don’t the figures balance to what I was expecting to see?
- These calculations are complex and take in multiple data sources. Here are some reasons why the figures on the cost disclosure may differ to what you are expecting to see: The data is based on historic activity so may differ from the current costs of holding the investment documented in the key investor information document.
- Frequency of your trading activity and the investment value at the time of calculation.
- The daily net asset value (NAV) of the security will have fluctuated over the year so using an approximation based on today’s value can give significant differences.
- FX rates applied to fees may result in the net impact being different from what you were expecting.
- Manufacturers calculate product costs based on NAV. Therefore for Investments Trusts trading at significant discount (or premium) to NAV the product costs may be a lot lower (or higher) than what you might expect.
Why are there Negative Costs?
There has been extensive debate about the existence of negative transaction costs, with many industry practitioners suggesting that they arise because of flaws in the methodology that underpins the rules.
The Financial Conduct Authority (FCA) examined this issue as part of its Call for Input on the Packaged Retail and Insurance-based Investment Products (PRIIPs) Regulation, from which the methodology is derived. In its Feedback Statement (FS19/1), the FCA noted that there was not “credible evidence to support claims that the methodology is not working as intended”. Moreover, the FCA concluded that “unrepresentative transaction costs are a result of poor application of the PRIIPs methodology”.
You can read the FCA’s Feedback Statement here.
Notwithstanding the FCA’s position on this issue, we have taken the decision to provide transaction costs to you as they are provided to us by the manufacturer, as we believe this is the best approach to presenting the manufacturer’s costs.
You should note that a negative transaction cost does not indicate a cost rebate and we are unlikely to be able to provide insight into why a particular manufacturer has calculated their costs in this way.
Why are my Government charges figures so high?
Government charges include stamp duty paid on purchases and tax deducted from dividends and distributions where applicable. This means if you have made frequent purchases or have a large holding these figures may be higher than expected. It’s also worth considering that it does not factor in any rebates on SIPP accounts such as those which are reclaimed. For example, Property income distributions in a SIPP account.
Why is my Russian Backed Security not appearing?
A number of Russian funds and all Russia-focused ETFs were suspended in early March 2022 after Russia launched a full-scale invasion of Ukraine. The Moscow Stock Exchange closed on 25 February and foreign investors were banned from selling their investments. International sanctions and Russian federal law prohibiting local issuers from having their shares traded outside of Russia has led to difficulties in the management and valuation of Russian linked funds and ETFs.
Fund charges are derived as a percentage of the fund’s value and so, as we cannot value your holding, we are unable to accurately ascertain the charge you will have incurred as part of your investment into the fund. We are therefore unable to provide a Cost Disclosure document for these products.