Unnecessary Hidden Fund Fees?

by | May 6, 2024

At Aisa we are campaigning against unnecessary hidden fund fees!

As a consumer, you should be able to invest money into the markets without the drag of high fees and charges. We are seeing numerous examples where investors either do not know these charges exist or are not being advised as to how you can avoid them. 

Why are financial advisers not telling you how to avoid unnecessary hidden fund fees? 

We recently published articles about regulation (expats.cz article) and the cost of ‘free financial advice’ both here in the Czech Republic and elsewhere in the EU. 

We think it is time that financial advice firms in the Czech Republic offered funds in the same way as more mature markets, such as the USA and the UK. Here is an example from a website that would have been common in the UK 20 years ago.

However, this example is from April 2024, a website here in the Czech Republic targeting expats:  

Our services are provided at no charge to you. We receive compensation directly from financial institutions, allowing us to offer expert guidance without any cost to our clients.

To be clear, this was BANNED in the UK almost 12 years ago. As a result, this has led to a wholesale better outcome for clients. It is a similar story in the US. led by low cost funds and ETF’s. that has been driven by market forces. Here in the Czech Republic we would like to be considered as part of that market force. 

So, let us start with: 

The bid-offer spread

Many reading this may not be familiar with the term but would most certainly have seen a common example when on holiday. Currency exchanges offer to sell to you at one price while you buy at another, higher, price. This is the bid-offer spread and this difference in price is often the commission to the broker. 

The impact of this cost on an investment is IMMEDIATE and unnecessary. 

In the UK and USA, in the past, these spreads were typically up to 3-5% of any money invested. While this is no longer the case, this practice persists both here and throughout the EU. In reality, while investments no longer usually have a different buying and selling price, they often have an entry fee that, completely coincidentally, is 3-5%. 

This entry fee is deducted from the funds at point of investment and is often not discussed with the investor. We have come across investors here in the Czech Republic that have dealt with ‘expat’ advisers and were completely unaware of this cost. While the adviser may have provided the relevant KIDs, it is often the case that the investors did not read the ‘small print’ and were spun the line of ‘you don’t pay us anything’. 

Recently, we checked out one fund that had returned over 7% growth in the first year, but actually resulted in ZERO return for the client due to the fees. 
A fee-based adviser will disclose all costs. Importantly, the ongoing costs of the funds/advice are also disclosed. 

Quantifying the cost of free advice and undisclosed costs

Let’s look a little deeper at an actual example of a fund currently being marketed to expat investors in the Czech Republic by an expat advice firm. 

The adviser could charge up to 5% at the start, while taking astronomic ongoing fees, The performance fee does not demand any specific performance at all. 

Furthermore, we have established that some of the ongoing fees will be paid to the adviser as well (we are not certain, but it starts at 0.5% and is possibly up to 1.5% pa).

The impact of unnecessary hidden fund fees

Let’s quantify these costs by considering a £100,000 (currency irrelevant) investment by a 50-year-old who wants to invest for 10 years. The investor is cautious/balanced when it comes to investing and is happy to accept a risk level targeting 5% pa before charges. 

Since the salesperson selling the fund above will not ‘charge the client’ directly (being paid by the provider), we will assume the fee-based adviser also does not charge an ongoing fee to compare like for like. However, the fee-based adviser has agreed a clear and explicit fee of 2% of the investment to cover the costs of the meetings, analysis, investment report and regulatory and professional insurance fees involved in implementing the investments. We will assume that both investments are placed on a regulated investment platform at 0.3% pa. (However, due to licencing, the reality is that an insurance bond will often be used instead of a platform, adding 1% pa to the costs, by commission-based advisers). 

We will also assume an ongoing fund fee of 0.7% for a balanced portfolio containing passive and managed clean funds offered by the fee-based adviser (clean funds pay no commission to the adviser) 

Example 1 - The Free Advice

We can look at this as a graph and as a table. 

Unnecessary hidden fund fees add up over time.

The investor would have made £6,468 over 10 years, and it would have taken 5 years for the investment to break even. 

Example 2 - The Fee-Based Adviser
With a fee-based adviser, you earn more over time, without hidden fees.

The investor would have made £50,070 over 10 years and the funds are likely to have broken even within a year.


We are here to raise awareness of an activity that was banned in the UK over a decade ago, is no longer utilised in the USA and yet the EU still permits it. 

What is worse is that we have come across advisers who also charge a fee and still apply these unnecessary hidden fund fees. We accept some funds may apply them on Czech platforms but then a transparent adviser can rebate the fees to their clients, not just keep them as well. 

The additional cost of using a “free”/commission-based adviser, compared to a fee-based adviser, using our example, could be £43,602 over 10 years. Remember, this is an actual example of a fund being sold in the Czech Republic by ‘expat’ advisers, way more expensive than clean funds that could have been recommended instead. And, we have not even added in the 15% performance fee that would have made the differential larger. 

We hope you agree that any adviser claiming ‘Expert advice with no cost to our clients’ has some explaining to do!  

We are thinking about starting a campaign group, so let us know your experience.

(Please note investments can go down as well as up and past performance is no guarantee of future performance. Also, fund growth is not linear as shown in the tables and during some investment periods the fund could be lower than that originally invested)

The views expressed in this article are not to be construed as personal advice. Therefore, you should contact a qualified, and ideally, regulated adviser in order to obtain up-to-date personal advice with regard to your own personal circumstances. Consequently, if you do not, then you are acting under your own authority and deemed “execution only”. The author does not accept any liability for people acting without personalised advice, who base a decision on views expressed in this generic article. Importantly, where this article is dated then it is based on legislation as of the date. Legislation changes but articles are rarely updated, although sometimes a new article is written; so, please check for later articles or changes in legislation on official government websites, as this article should not be relied on in isolation.

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Post written by:

Chris Lean

In the UK he worked with accountants as an independent financial adviser, qualified as a Chartered Financial Planner and became an examiner for the Chartered Insurance Institute. He also qualified as a European Financial Planner and specializes in investment and pension advice to clients.

Aisa International is the only financial advice service company specialising in advice for expats that is regulated as a Securities Trader in the Czech Republic, USA, and UK.