Low fees make all the difference
One of the most famous investors of all time, Warren Buffett, said: "Costs really matter in investments". What he meant was that fees matter enormously when you invest for the long term, so that the returns reach you largely undiminished.
In Iceland it has been almost impossible to invest in funds or use wealth management without paying exorbitant fees that eat up most of the real return the investments deliver over the long term.
Here you can see, clearly and plainly, what it costs to invest with Spesía. We have no hidden or unexpected fees, and we encourage you to compare prices. At the bottom of this page you can also see how we compare with other investment options in Iceland.
The Icelandic banks sometimes seem to go out of their way to hide fees and make it hard to understand how much you are paying and for what. Spesía is different. We work hard to keep our price list as simple and transparent as possible.
| Cost item | Cost as percentage of assets |
|---|---|
| Spesía's wealth management fee | 0.45% per year |
| Spesía's fund management fee | 0.45% per year |
| Spesía's total fee | 0.90% per year |
| Transaction costs and fees of the underlying assets in Spesía's funds (varies slightly – estimated figure) | ~0.08% per year |
| Your total cost | ~0.98% per year |
According to our calculations, the annual costs and fees across all equity funds and mixed funds run by Icelandic fund managers average around 2.4% per year, with vast majority of funds having total costs in the range of 2 to 3 percent per year.
You can find an overview of all Icelandic equity and mixed funds and their costs here.
High costs might be justifiable if these funds were generally outperforming the market and the indices they benchmark themselves against, and their fund managers were therefore generally “earning their keep”. Unfortunately, nothing suggests this is the case when you look at performance over recent years and decades. No Icelandic fund can demonstrate such a track record. This is also consistent with international research showing that very few funds – fewer than 10% – beat the market average over a horizon of 5–10 years, let alone longer periods.
Fund price lists in Iceland are usually complex and opaque, and costs and fees can go by many names, such as purchase costs, redemption costs, price spread, performance-based costs, fund management costs, transaction costs, custody account fees, other costs, and so on. Marketing material is also often misleading when it comes to fees. For example, it is common to advertise up to 100% off the purchase fee when buying into funds, even though that cost actually matters little compared with the fund management cost, which is charged every single year and may be 2% or more.
However, all fund managers are required to prepare, and make available to every investor, a so-called Key Information Document (KID), which contains important information about the funds’ costs. These documents are often not very prominent and the cost information is at the end of these documents, but it pays handsomely to make a habit of reading the cost section carefully before investing in funds.
For those using investment advisory or wealth management services (which are generally not available unless you have at least ISK 30–50 million under management), it is even harder to get a clear picture of the costs.
Wealth management price lists are not always public, and discounts are common for those with large amounts under management. On top of that, the fee structure is multi-layered, because you generally pay both a wealth management fee and the fees of the funds that the wealth manager directs your money into.
By Spesía’s estimate, the total cost of wealth management in Iceland is generally around or above 3% per year, all things considered, except for customers with very large amounts under management (ISK 1 billion or more). To be fair, wealth management generally provide some valueable services, such as personal investment advice and, in some cases, access to investments you would otherwise not have been able to take part in.
But despite these advantages, there is no way to justify a total annual cost of 3% or more – no wealth manager can make that up over the long term through good service or clever investment choices. Spesía encourages anyone in wealth management to look carefully at the total annual cost of the management itself and of the funds and other assets their money is invested in.
