Investing Guide
Less visible costs when investing: TER, in-house funds and retrocessions
What «hidden costs» actually means for bank investment solutions: product costs that appear on no statement, the mechanics of in-house funds, the Federal Supreme Court's retrocession case law — and how to look up your own figures.
Last updated on September 23, 2026 · Reviewed by our FINMA-licensed advisory team
In brief
With investment costs, «hidden» rarely means «secret» — it means: not visible as a separate line on the statement. A fund's ongoing charges (TER) are charged directly to the fund's assets and reduce its performance without ever appearing on an invoice. On top of that come costs the TER itself does not show — such as the transaction costs within the fund — and compensation that product providers pay to distributors (retrocessions).
Two facts provide orientation. First, the Federal Supreme Court has ruled that in an agency relationship retrocessions belong in principle to the client — at banks too, and for group-owned products as well (BGE 132 III 460; BGE 138 III 755). Second, you have statutory information rights: costs and economic ties to third parties must be disclosed (FIDLEG Art. 8 and 26), and the product costs are stated in the key information document and the factsheet — anyone can look them up.
This page provides general information and does not rate individual providers. It is neither investment advice nor a recommendation to buy, sell or switch, and it does not replace legal advice. As of 2026, without guarantee.
The three cost layers of an investment solution
To understand the total costs, look at three layers. First, the service level — management or advisory fee, custody fee, brokerage per transaction. These costs are stated in the contract and on the statement. Second, the product level — the ongoing charges of the funds and products used, charged directly to the product's assets. Third, the remuneration level in the background — payments between product provider and distributor, which are not visible without disclosure.
Only the first layer appears on the statement. The second sits inside the performance, the third in the relationship between bank and product provider. All three together make up the total costs — which is precisely why a comparison that looks only at the visible fee falls short.
The TER — and what it does not show
The total expense ratio (TER) summarises the costs charged on an ongoing basis to a fund's assets as a percentage of average net assets. It is defined in an industry guideline of the Asset Management Association Switzerland, which FINMA has recognised as a minimum standard — the figure is therefore standardised and comparable.
What matters is what the TER does not include: the transaction costs the fund incurs when buying and selling its investments are expressly not part of the operating expenses relevant to the TER (exception: all-in-fee models). Issue and redemption commissions also run alongside it. A low TER is therefore a statement about the ongoing charges — not about all costs.
Performance-related fees must be included in the TER and additionally disclosed separately. Where such a fee exists, it is stated in the key information document and the fund prospectus.
In-house funds: understanding the mechanics
If a bank uses funds of its own group in custody accounts and mandates, the product fees of those funds flow to the group's own fund management company — the remuneration stays within the group. That is legal and widespread; but it creates a structural dual role: the same group selects the products and earns on the products selected.
How this is to be assessed in law was set out by the Federal Supreme Court using distribution compensation as its example: a conflict of interest triggering the duty to surrender already exists «if there is a danger that the agent might thereby be induced not to take sufficient account of the principal's interests» (BGE 138 III 755 E. 5.3) — and this applies to group-owned products as well.
Whether a specific in-house fund costs more or less than comparable products from other providers cannot be said across the board — but it is stated in the documents of the fund concerned. The section «Looking it up yourself» below shows where.
Retrocessions: what the Federal Supreme Court has ruled
Retrocessions — also called portfolio maintenance commissions or, colloquially, kickbacks — are recurring payments from fund providers to the distributing or managing entity. The case law on them is settled:
BGE 132 III 460 (2006)
Retrocessions received by an asset manager are subject to the duty to surrender under agency law (OR Art. 400 Abs. 1) — in principle, they belong to the client.
BGE 137 III 393 (2011)
A waiver of surrender given in advance is only valid if the client knows the key parameters of the retrocession agreements and the order of magnitude of the payments to be expected.
BGE 138 III 755 (2012)
The duty to surrender also applies to banks acting as asset managers — for distribution compensation from product providers outside and inside their own group.
BGE 143 III 348 (2017)
The claim to surrender becomes time-barred after ten years (OR Art. 127); the period runs for each individual payment from its receipt.
Under supervisory law, FIDLEG Art. 26 applies alongside this: financial service providers may accept third-party compensation only if clients have been expressly informed in advance and waive surrender — or if the compensation is passed on in full. Whether and how your own institution handles retrocessions is stated in the contract documents and is a legitimate question to put to any provider.
Two levels at once: when service and product both cost
One constellation deserves particular attention: where a management fee is charged for the service and the money is at the same time invested in products whose ongoing charges also apply, clients pay on two levels — once for selection and support, once inside the product itself. That is not in itself impermissible; but the total burden only emerges from the sum of both levels.
What can be compared are therefore always total-cost categories: a solution with a low service fee and cost-intensive products can cost more overall than one with a higher fee and low-cost building blocks — and vice versa. Which constellation is present is shown only by adding it all up.
Looking it up yourself: where your figures are stated
All the amounts described are documented — this is how to find them:
TER of the fund
Stated in the key information document (costs section) and in each fund's factsheet; both documents are available from the provider or the distributor (FIDLEG Art. 58 ff.).
Service and custody costs
Stated in the contract and on the fee statement; where a personal recommendation is made, the provider must inform you about the costs of the service (FIDLEG Art. 8 Abs. 2).
Third-party compensation
Economic ties to third parties must be disclosed (FIDLEG Art. 8 Abs. 2 Bst. b); the retrocession arrangements are usually set out in the contractual conditions. Asking is legitimate — the answer is part of the statutory information.
The overall picture
Service costs plus weighted product costs plus incidental transaction costs add up to the total burden of one year. That figure makes solutions comparable.
Frequently asked questions
What are hidden costs in investing, specifically?
Costs that do not appear as a separate line on the statement: the ongoing product costs (TER) are charged directly to the fund's assets, transaction costs within the fund are not even included in the TER, and third-party compensation flows between provider and distributor (Source: AMAS TER guideline, FIDLEG).
Does the TER show all the costs of a fund?
No. The TER covers the operating costs charged on an ongoing basis to the fund's assets; the transaction costs the fund incurs when buying and selling its investments are expressly not part of it (exception: all-in fee). Issue and redemption commissions also run alongside it (Source: AMAS TER guideline, recognised by FINMA).
Are in-house funds worse than others?
That cannot be said across the board, and this page does not rate providers. Structurally, in-house products involve a dual role (selection and remuneration within the same group); the Federal Supreme Court affirms a relevant conflict of interest as soon as there is a danger that client interests might take second place (BGE 138 III 755). The specific costs are stated in the fund documents (Source: BGer).
Do retrocessions belong to me as a client?
In an agency relationship, in principle yes: they are subject to the duty to surrender under OR Art. 400 (BGE 132 III 460), at banks and for group-owned products as well (BGE 138 III 755). A waiver is only valid with prior, specific information (BGE 137 III 393) (Source: BGer).
For how long can a claim to surrender be asserted?
The claim becomes time-barred after ten years; the period begins for each individual retrocession payment upon its receipt (BGE 143 III 348, OR Art. 127). For the assessment of a specific case, legal advice is the right route (Source: BGer).
Does my bank have to tell me whether it receives retrocessions?
Financial service providers must inform clients about economic ties to third parties (FIDLEG Art. 8 Abs. 2 Bst. b) and may accept third-party compensation only with prior express information plus waiver — or pass it on in full (FIDLEG Art. 26) (Source: FIDLEG).
Where can I see the TER of my own funds?
In the key information document (costs section) and in the factsheet of the fund concerned — both must be available; the key information document is required by law and must be easy to understand (FIDLEG Art. 58 and 61) (Source: FIDLEG).
What does all-in fee mean?
A fee model in which one flat fee covers several types of cost (e.g. management, custody, transactions). What exactly is included is defined by the specific contract — here too, only the overall calculation including product costs shows the full picture (Source: market term, defined by contract).
Sources
- Federal Supreme Court — BGE 132 III 460 (duty to surrender retrocessions, OR Art. 400)
- Federal Supreme Court — BGE 137 III 393 (requirements for a waiver given in advance)
- Federal Supreme Court — BGE 138 III 755 (banks; products from outside and inside the group)
- Federal Supreme Court — BGE 143 III 348 (ten-year limitation of the claim to surrender)
- AMAS — Guideline on the calculation and disclosure of the TER (recognised by FINMA as a minimum standard)
- Fedlex — FIDLEG Art. 8, 26 and 58 ff. (duties to inform, third-party compensation, key information document)
Every deadline and figure on this page has been verified against the official sources linked above. As of the date shown at the top. This page does not replace individual advice.
Advice
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