Why I love my LISP

A Linked Investment Service Provider (LISP) is a one-stop shop that administers a variety of underlying investments, available directly or via investment vehicles such as endowments, retirement products and tax-free savings accounts.

A LISP packages multiple collective-investment schemes together that you would normally have invested with directly and consolidates your investment experience into one platform, saving you having to log in to multiple websites to track your various savings. So while you may have invested in products at multiple underlying institutions, you only have to go to one place for a bird’s eye view of it all – the LISP will handle all your transactions and give you a single, consolidated report of how all your investments are doing. 

At one glance you can see your net value and how it changes over the months and years.

Benefits of a LISP

Using a LISP you can mix, match and blend investment managers as you wish. 

For example, via a Retirement Annuity you can invest in a blend of Sygnia, Investec, Coronation and Prudential funds and a LISP will allow you to open and manage this as one account. Furthermore, you will only be required to complete one set of application forms and supporting documentation. This cuts out the admin and paper work around opening up various accounts at different unit trust managers.

In addition, a LISP has a minimum investment limit, for example R20 000.  You can then split your R20 000 across your chosen blend of investment managers, thereby increasing the diversification of your investment. If you had to go to each unit trust manager separately they would all have their own minimum investment requirement, so you would need to have much more to invest to get the same amount of diversification across investment managers.

A LISP also provides you with consolidated reporting and one set of investment tax certificates per annum, making tax returns a breeze to fill in; one less thing to worry about.

Although a LISP adds a layer of administration costs, if you consolidate your savings you will benefit from scale: some platforms offer threshold discounts on your total savings value.

Who should use a LISP

It’s a busy world and most of us don’t have time to track market news and administer investments at various institutions, let alone draw together a personal report of our financial positions.  If this is you, then a LISP is just what you need. 

A LISP provides protection through simplicity – you won’t neglect regular oversight of your investments, because it’s quick and easy – and you don’t have to do any of the consolidation yourself. 

You may be thinking: my financial advisor does all of this for me anyway, so what’s the problem?

If you are just starting with your savings, or your savings plan isn’t vastly complex, investing directly through a LISP may be the answer for you. A LISP does not negate the role of the Financial Planner, who can provide indispensable value in the area of financial planning. 

Some LISPs will provide additional tools that help you to build a financial plan, and even electronic advice such as a robo-advisor.  If all your investments are consolidated, these tools provide a more accurate and holistic projection, putting the power in your hands. 

Choosing a good LISP

When surveying the LISP platforms available, you should decide what is important to you.  Some factors crucial to your evaluation are:

• Funds available on the LISP platform and the past investment performance of these funds.

• Fees, in particular the administration and transaction fees levied by the LISP, should be low or, preferably, zero.

• Transparency of fees – from the platform fee through to the management fees and performance fees of all underlying investments that you’re accessing through the LISP – what you’re paying, and what you’re paying for, should be clear.

• A visible commitment to the Treat your Customer Fairly (TCF) principle espoused by the Financial Services Board.

• The option for zero administration fees if you choose from a subset of products; often these options provide all the diversification you need, especially if the funds offered are multi-manager funds.

• A fully-featured online portal that allows you to transact electronically on your accounts without completing reams of paperwork.

• Access to a wide variety of products, not just ordinary savings.  For example: tax-efficient savings policies, tax-free savings accounts, retirement savings and preservation funds. 

ADDITIONAL NOTES

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NIC BROWN

LEAD SOFTWARE ARCHITECT, SYGNIA GROUP**

Nic is a Software Architect with over 14 years of experience in software engineering. Before joining Sygnia in March 2013, Nic worked at Jam Warehouse Software, fulfilling a spectrum of software-related roles including senior engineer, team lead, project manager and business analyst. He was responsible for technical leadership and the implementation of line-of-business products and bespoke solutions. Clients included Tesco Plc, The Foschini Group, SAB Miller, Pick n Pay, Pam Golding and Woolworths.

Prior to this he worked at open source start-up Exinet on VirtualBook, and a programmable corporate governance assessment system for a Swiss-based academy for board member development.