CHARGES
All forms of investment carry a cost. Charges pay for the facilities to set up your account, keep you in touch with what is going on with your investment and ensure that it is well administered. In many cases managers will operate helpdesks to which you can direct questions about your fund.The charges also pay for the professional management of your fund - researching the companies and markets in which the fund invests and buying and selling the underlying assets in the market.
There may be an initial charge when you first invest (or for each payment if you are saving regularly). Some funds have exit charges instead, though this is less common.
Generally, investment funds are subject to annual management charges which tend to be in the range of 1% to 1.5% of the value of your investment. Other costs, such as trustee and audit fees, will also usually be charged to the fund and are included, together with the annual management charge, in the Total Expense Ratio (TER). The TER therefore gives a clearer idea of the total cost to you.
If you buy your investments through an adviser on a commission basis, much of any initial charge and a portion of the annual management charge will go to the adviser as commission. Your adviser is obliged to tell you how much commission they will receive from your investment. Alternatively, some advisers may waive the commission and charge you a separate fee.