The fees you pay on your investments can have a big impact over time. As Sygnia founder Magda Wierzycka points out, a reduction in costs of just 2% per annum can mean you end up 60% better off over a 40-year period. That is the difference between retiring with R3 million and R4.8 million!
The fees you pay on your investments can have a big impact over time. As Sygnia founder Magda Wierzycka points out, a reduction in costs of just 2% per annum can mean you end up 60% better off over a 40-year period. That is the difference between retiring with R3 million and R4.8 million!
There are a number of ways to save on costs, and as a starting point every investor should investigate what fees they are paying on the unit trusts they use. But there are other ways to save, too.
Firstly, many people invest in unit trusts through linked-investment service provider (LISP) platforms, which bring products from different asset managers together in one place.
The LISP provider charges a fee for this, which is usually around 0.5% per annum. While it may be convenient to have all your investments in one place, you can avoid this cost by investing directly with the asset managers themselves. You may not get a consolidated report showing all your investments together, but it is worth considering whether that is really worth the money you are paying.
Secondly, if you are invested in a retirement annuity (RA), you are probably being charged a fee on top of the platform fee. These products are fairly generic, so there is little reason to pay one provider more than another. Shop around and make sure you are not paying more than 0.5% for the platform and savings product combined.
Some providers will even waive certain fees if you use their unit trusts. Sygnia, for example, does not charge for administration or for the savings product if you invest in Sygnia unit trusts.
Thirdly, be aware of what your financial advisor is charging you. While it is very sensible to seek independent advice, the advice is only valuable if it is independent and the fee is reasonable. Some financial advisors are tied agents, which means they represent particular companies and earn a fixed commission for selling their products.
Truly independent advisors can advise you on a range of products and should be willing to negotiate their fees, which 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, making you better off in the long run.