Management fee

For wealth managers with a passive investment approach who implement the investment strategy primarily using exchange-traded funds (ETFs), the management fee covers the costs of determining the investment strategy as well as the construction, automated management, and monitoring of the portfolio.

It usually also includes the costs of investment management. This entails the periodic review of model strategies, the selection and review of the investment instruments used, as well as the replacement of such instruments when it is advantageous from the client’s perspective.

Thus, the investor does not pay for the attempt to beat the market through active stock selection, but rather for the systematic implementation of a chosen investment strategy.

In addition, the fee typically covers ongoing rebalancing, which restores the original weighting of asset classes following market fluctuations.

Since passive strategies do not rely on extensive research or expensive fund managers, the management fee is significantly lower than with active approaches. It is reported as an annual percentage of assets under management and deducted from the investment capital. An important aspect with passive managers is transparency: the management fee is often charged as a flat fee that covers not only management but also trading and custody costs.

Investors should nevertheless note that the management fee generally covers primarily the wealth manager's services. In addition, there are usually the external product costs of the ETFs used (Total Expense Ratio) as well as specific Swiss taxes, such as stamp duties (Note: In most Swiss cantons, a flat fee in the per mille range on the assets under management can be deducted for tax purposes).

Overall, the low management fee charged by passive wealth managers ensures that a larger portion of the market return remains with the investor. This has a significant impact on investment returns, particularly over long investment horizons, due to the compound interest effect.

True Wealth’s management fee ranges from 0.25 to 0.50 percent on discretionary assets and is 0 percent on investments in pillar 3a. The complete fee overview can be found here.