Most people are familiar with that unpleasant feeling just before they receive a requested quotation. This feeling does not necessarily have to apply to you, when you decide to invest your money.
The following cost factors are normally involved when you invest in retail investments:
1.The Advice fee to the Financial Advisor (your Financial Services Provider),
2.The Management Fees of the Various Fund Managers ( e.g. Coronation, Cadiz, Absa, Alan Gray, Investec, etc),
3.Policy and admin fees from the Product Providers (e.g. Sanlam, Momentum, Old Mutual, Discovery Invest etc).
The greater the fees, the more it will eat into your investment. Just to sketch you an idea on how costs/ fees could have an impact on value over time, look at the following example:
R1000 p/m to invest over a 10 year term, with 10% assumed return and with an annual 10% contribution increase.
0% fees matures a value of R298, 057 future value
1% fees matures a value of R284 723 future value
2% fees matures a value of R272 062 future value
3% fees matures a value of R260 041 future value
The payout difference between paying 0% fees and 3% fees per annum is around R38 016 future value over the end of a ten year period. Now let’s bring that future value back into today’s buying power by a discounted rate of 5% and we get R23, 339.
A few tips when investing via an endowment structured investment vehicle would be to view and discuss the list of fund managers available on the product provider’s platform of choice. One must also consider the kind of unit trust funds they offer, as this would be the “engine” of your investment vehicle and the better above the class average they perform during good and bad times, the stronger the investment will perform.
It is also possible to invest with a certain Product Provider to qualify for a fee reduction of up to 100% of all its initial and annual administration fees, policy fees, the additional monthly administration fees from 100% allocation, financial adviser’s initial advice fees and investment management fees. Terms and Conditions do however apply.
You, therefore, need to make some time with your trusted Financial Advisor and be more interactive with questions surrounding costs when investing. The types of Fund Managers, the economy and the level of risk accepted within the investment can all have an effect on your investment.
For more information and to determine the best suited investment option for you or your family and friends, please call Anton du Preez on 083 445 2066 or email: firstname.lastname@example.org. We look forward to hearing from you.