Over time, the fees that you are paying on your investments can have a big impact.
Over time, the fees that you are paying on your investments can have a big impact. As the CEO of Sygnia, Magda Wierzycka points out, a reduction in costs of just 2% per annum can mean that you end up 60% better off over a 40 year period.
That is the difference between retiring with R3 million, or retiring with R4.8 million.
As a starting point, every investor should therefore pay close attention to the unit trusts they are using and what fees they are charging. But there are also a number of other ways to save on costs.
Firstly, many people invest in unit trusts through linked-investment service provider (LISP) platforms. These bring products from different asset managers together in one place.
However the LISP provider will charge you a fee for this, which is usually around 0.5% per annum. While it might be nice to have all your investments in one place, you can avoid this cost by investing directly with the asset managers themselves. You might not get a consolidated report showing everything together, but is that really worth the money you are paying?
Secondly, if you are invested in a retirement annuity (RA), you are probably being charged another fee on top of the platform fee. These products are however fairly generic, so there's little reason to pay one provider more than you would any other.
Shop around and make sure that you aren't paying above 0.5% for both the platform and the savings product together. Some providers will even waive certain fees if you use their unit trusts. Sygnia, for example, will not charge for administration or for the savings product if you invest in Sygnia unit trusts.
Thirdly, be aware of what your financial adviser is charging you. It is very sensible to get independent advice, but only if that advice really is independent and the fee is reasonable.
Some financial advisers are tied agents, which means that they represent certain companies and earn a fixed commission for selling their products. True independent advisers can however advise you on a number of products and should be willing to negotiate their fees. These should be set somewhere between 0.5% and 0.75% per year.
Finally, if you have a retirement fund through your employer, ask to see the options available to you within that fund. Many of them offer different underlying investments, and you may be able to move to a lower fee option, which will mean you are better off in the long run.
SYGNIA GROUP
The Sygnia Group comprises six operating companies; Sygnia Life, a life assurance company, Sygnia Asset Management, a licensed asset management company, Sygnia Collective Investments, a unit trust company, Sygnia Financial Services, a LISP, Sygnia Securities, an execution-only stockbroker and Sygnia Systems, a financial software development company.