Sygnia tweet on rival product is below the belt
It highlights why investors need to define their investment goals and do their homework
A TWEET by Sygnia chief executive Magda Wierzycka earlier this week claimed to best a rival product due to lower charges. In doing so, Wierzycka not only shamelessly self-promotes, but also potentially transgresses South Africa’s laws around comparative advertising. It also highlights just why investors need to define their investment goals, do their homework and obtain professional advice for the investment product best suited to their investment needs.
Wierzycka, writing in her personal capacity on Twitter, said the “management fees for the Sygnia S&P500 ETF are 0.1 percent per year. Fees charged by the Allan Gray Orbis Fund are 10 times that. Let that sink in. You are paying 10 times more for underperformance. Please stop believing advertising and start making your own decisions.”
Comparative advertising can be described as “an advertisement in which a particular product or service specifically mentions a competitor by name for the express purpose of showing why the competitor is inferior to the product naming it”.
This is not the first time Sygnia’s chief executive has used the social media platform to self-promote, but, in challenging competitors in this manner, has she pushed the envelope too far?
Allan Gray is an award-winning asset management company and has outperformed many asset management companies over several years.
According to Sygnia’s website, the annual management fee for the Sygnia Itrix S&P 500 ETF is 0.12 percent, but the total investment charge comes to 0.2 percent. So, is Wierzycka actually comparing apples with apples?
The fees for the Allan Gray-orbis Global Equity Feeder Fund – Allan Gray markets a few of Orbis’s funds – are 1.49 percent, depending on benchmarked performance, 0.16 percent for out- or under-performance and 0.05 percent for “other expenses”, which bring the total expense ratio to 1.7 percent. Add 0.1 percent for transaction costs, and the total investment charge is 1.8 percent, the Allan Gray website showed yesterday.
The Sygnia S&P500 ETF’S objective is to enable investors to track the movements of the S&P 500 Index. It is a high-risk, passive investment. The S&P 500 Index is an index of the 500 biggest Us-listed companies.
The Allan Gray-orbis Global Equity Feeder Fund, according to its website, is a unit trust that aims to create longterm wealth for investors by investing in stock markets around the world. It aims to perform better than global stock markets, without taking on greater risk.
The unit trust invests in the Orbis Global Equity Fund, which is exposed to selected global shares.
“Orbis ignores market sentiment and buys shares in companies its research process indicates are undervalued. Orbis sells them when they reach its estimates of fair value,” the Allan Gray website notes.
Association for Savings and Investment South Africa (Asisa) senior policy adviser Taryn Hirsch said they had introduced the Asisa Retail Standard on Effective Annual Cost (EAC) in 2016, to enable consumers to make more informed decisions when choosing savings and investment products.
“The EAC standard requires Asisa members to disclose costs in a way that consumers and advisers can compare charges in a meaningful way irrespective of whether the product is a unit trust, living annuity, retirement annuity or an endowment policy,” said Hirsch.
“The EAC standard facilitates cost comparison only and does not provide insights into the differences in product features. This is where a financial adviser plays an invaluable role in terms of highlighting the differences in the products being compared and their suitability to the client’s need,” said Hirsch.
“The standard does, however, strongly caution product providers against manipulating any values to inflate the projected or anticipated performance of a product, or to make a product appear less expensive.”
Although the tweets may have been issued in her personal capacity, Wierzycka should know there is no such thing as a private public platform and therefore her public utterances comparing products to her own could very well constitute comparative advertising. Not only that, but since there is no direct comparison in this case, her twatter could also be viewed as fake news. We’ll leave you to decide.