What are transaction costs?

We look at the calculation of the explicit and implicit elements of transaction costs

February 2021

Graham Finlay

Vice President,
Strategic & Technical Sales

LEARN MORE ABOUT THE AUTHOR

45 MINS STRUCTURED CPD

Subscribe to our Insights

Risk Disclaimer

This content is directed only to persons having professional experience in matters relating to personal investment (investment professionals) and should not be distributed to anybody else. It has been prepared for general information purposes only. It does not constitute advice (whether investment, legal, regulatory, tax or otherwise) provided by BMO Global Asset Management (EMEA) (BMO). Certain content in this document is based on our own reading of legislation, regulation, or guidance issued by a government or regulatory authority, as at February 2021, which is subject to ongoing change. Tax treatment is based upon individual circumstances. BMO gives no warranty or representation, whether express or implied, that such content is up to date, complete, or accurate.

Investment professionals in receipt of this document should not rely on any of its content. They remain solely responsible for advising their underlying clients in accordance with their own legal and/or regulatory obligations and for taking their own independent advice as they determine is necessary.

To the extent lawful, BMO excludes all responsibility and associated liability for any loss or damage suffered by any recipient of this document who chooses to rely on its content, whether occurring in contract, tort (including negligence), breach of statutory duty, or otherwise, even if foreseeable.

Key takeaways:

  • Understand the key elements required under MiFID II cost disclosure requirements
  • Investigate the differences between ‘explicit’ and ‘implicit’ costs and charges within the transaction costs
  • Understand the ‘arrival price’ methodology when calculating implicit costs

The regulatory intent of MIFID II was to enable investors to see and fully understand all the costs involved in investing in a fund. However, positioning MiFID II transaction cost disclosures is still causing confusion. Graham investigates the factors and methodologies impacting the calculation of their explicit and implicit elements, with the aim of better client conversations.

BMO Adviser Edge - What are transaction costs

Risk Disclaimer

This content is directed only to persons having professional experience in matters relating to personal investment (investment professionals) and should not be distributed to anybody else. It has been prepared for general information purposes only. It does not constitute advice (whether investment, legal, regulatory, tax or otherwise) provided by BMO Global Asset Management (EMEA) (BMO). Certain content in this document is based on our own reading of legislation, regulation, or guidance issued by a government or regulatory authority, as at February 2021, which is subject to ongoing change. Tax treatment is based upon individual circumstances. BMO gives no warranty or representation, whether express or implied, that such content is up to date, complete, or accurate.

Investment professionals in receipt of this document should not rely on any of its content. They remain solely responsible for advising their underlying clients in accordance with their own legal and/or regulatory obligations and for taking their own independent advice as they determine is necessary.

To the extent lawful, BMO excludes all responsibility and associated liability for any loss or damage suffered by any recipient of this document who chooses to rely on its content, whether occurring in contract, tort (including negligence), breach of statutory duty, or otherwise, even if foreseeable.

Bank your CPD

Please answer the multiple choice questions below in order to bank your CPD. Multiple attempts are permitted until all questions are correctly answered.

Related articles
VIEW MORE