Reduction in Yield Calculator

Does anyone do these manually?

I've done a MiFID compliant (I think) table, and am trying to build in the RIY, but having a complete brain block.

I know it's not as simple as achieved growth plus charges = total growth, and the charges are the RIY, as the RIY is usually higher than the charges %. Hope I'm making sense.

I don't have access to FE or anything like that to plumb charges in. Anyone know any free calculators?

Ruth Baker

Comments

  • Do you use CashCalc? They've got one now

  • No, we don't at hte moment @arongunningham , I'll take a look.

    I've got a very simple formula set up now, and testing it, on the investments that have gone down over the period though, it obviously has a lower RIY than the actual charges, which looks just odd.

    Ruth Baker

  • @ruthiebusybee the RIY can be lower.

    RIY is a calculation to show what the fees would be worth if they'd been invested.

    If the client had kept the cash used for fees and the invested portfolio had fallen, they're better off than if the fees had been invested.

    It's not simple to do manually. You need a lot of data points. At the most basic it's a time-weighted return for the period with and without the fees and the RIY is the difference between the two.
    Benjamin Fabi FPFS
    Chartered Financial Planner

    http://twitter.com/benjaminfabi 
  • Thanks @benjaminfabi

    I've got a spreadsheet set up that does that, but only in very simple form, using the whole year as 1 period and assuming all fees were taken at once, so start value and end value giving growth, and then fees, with growth added.

    Is that okay? Is that too simple? I think there's a tendency to over think this.

    Also, what we're finding with quite a few provider statements that we've seen so far, is they don't give any values at all on the charge statements, so no reference point.

    Ruth Baker

  • Hi,

    If you're doing an ex-post disclosure then I think it's too simple to do it as you have. Then again, it's how I've done it where it's been the only option. The problem is that as soon as you do it without actual data at the actual points, it's not a proper ex-post disclosure.

    I'd be challenging the providers on those statements. If you can't understand them then the client definitely won't.

    Benjamin Fabi FPFS
    Chartered Financial Planner

    http://twitter.com/benjaminfabi 
  • I may have the wrong end of the stick but I think this is for ex-ante disclosure?

    Ruth, If I am picturing your spreadsheet correctly, you have a value, of say £100,000, growing at 5% a year for 10 years, with charges of 1.5% annually being deducted. Then in a separate column, you grow the £100,000 at 5% a year for 10 years, without the deduction of charges. After ten years, you will obviously have two different fund values. How do you generate the RIY? Is it by using the goalseek function to adjust the growth in the second projection, so the values after ten years are equal? So you might have 5% vs 3.9%, making the RIY 1.1%.

    Am I on the right track?

    You said you are using whole years as 1 period. I think that is probably adequate although accuracy will be compromised slightly by not using months, or even days as 1 period. Someone may have a different opinion on that though!

  • @benjaminfabi I've attached the calcs, I am using actual data. I've got monetary actual charges and worked back to %, and in some cases (EIS/VCTs) where only a % is given it's been "best endeavours".

    Until provider statements are available, is everyone working this entirely manually from each individual fund charges are taken from etc? How would we even begin with that in the EIS/VCT invs?

    The providers with no values on their statements so far are Blackfinch and the sample Aegon issued. Monetary and % amounts, but no confirmation of starting or end values.

    Ruth Baker

  • @Gustavo_Fring no, ex-poste. Giving them the RIY and true cost of charges annually.

    For ex-ante, we run provider quotes and the quotes give us the RIY after 20 years for example. We use that figure in recommendations.

    Ruth Baker

  • Ah, ok. Thanks Ruth.

  • Ruth,

    I think that's the best you can expect to be able to do with the information you have. I did something very similar here with the maths basically the same as yours.

    Benjamin Fabi FPFS
    Chartered Financial Planner

    http://twitter.com/benjaminfabi 
  • Great, thanks @benjaminfabi , I can't see how else we can do it without the provider statements........which one presumes will be more technically accurate.

    Ruth Baker

  • I do believe your table was the inspiration for mine! @benjaminfabi

    Ruth Baker

  • There is a RIY calculator on FE Analytics as well

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