What is an administration fee?
An administration fee is something a company has to pay that is not covered by the typical overheads and internal budget. This is an incurred fee to enable the business to function. Administration fees are a common cost associated with the investment industry aka management funds. Without them, companies would not be able to remain in active operation.
How are administration fees calculated?
Administration fees are calculated typically on a percentage basis. This means, your combined asset value and length, depth, and scope of the portfolio all factor in and plays a role in determining what you might end up paying. Some platforms offer a flat fee, but this is rare to find.
What are the administration fees associated with the financial sector?
The financial sector is typically three-pronged. Banking, investment, and insurance are the main components that make up this trio, and each one has its own administrative process and fees attached. When it comes to investment, there are three core areas that are worth discussing.
Platform Fees
Your investment platform is where you go buy or sell, and keep a watchful eye out. If you use one, there is an associated administration fee or custody fee for managing these investments. This will be a percentage of your total asset investment revenue and is calculated as per each financial body.
Management Fees
When dealing with funds, there are management fees to pay. These exist to cover all the necessary admin and there are two types to note.
TERs
Total Expense Ratios (TERs) are a representative percentage of the combined cost of the asset. It considers factors such as legal fees, trading fees, and auditor fees too. These are all considered operational expenses, and the amount is calculated as a division in relation to the size of the asset being managed.
OCF
The Ongoing Charge Figure (OCF) is paid for the length of retainment of any given investment. It covers all the costs incurred from managing an asset and is calculated as a percentage of the combined value.
Charges for Dealing
Every trading platform has costs incurred by trading shares. When it comes to actually trading or selling your stocks, shares, and other assets, there will be a price to pay for doing so. This means, every time you sell, you also pay an admin fee to the platform for the pleasure of doing so.
What is the average administration fee for investment platforms and how does it affect my investment returns?
The average administration fee varies on what type of investment you have, the diversity of your portfolio, and which platform you’re using. The law states that companies are obligated to be upfront with their admin costs. This is helpful to understand what you’re getting into, and when deciding how best to invest. These fees will affect your investment, but it is a thing that can be managed nevertheless. Factor in a typical 0.3% administration fee using our calculators and this will enable you to fully plan ahead.
Administration fees are a big point of discussion. Whether you are worried about how they will affect your investment, or you’re just trying to get your head around what they might cost you, having the information is better than going in blind.
