Regarding Gregg Sneddon’s article What’s so wrong with rebates? ( Finweek, 10 October issue).
I have the following problem with rebates (commission percentages):
1. Commission is not based on time (effort) spent. At 1% the purchase of R100 000 or R200 000 of a specific product will result in commissions of R1 000 and R2 000, while the effort is the same. Time spent to draft a plan will depend on the availability of information and the client’s requirements and is not directly proportional with the size of the estate; there wi will be a fixed time involved.
22. Commission does not ref le lect a realistic hourly rate of, sa say, R700. If I approach a plannner and have R5m to invest, a co commission of 1% will entail R50 000. Is he really going to spend nine working days of e eight hours each drawing up a p plan and advising me? Risk has nothing to do with the fees, as the investor carries the risk. Knowledge has nothing to do with ith th the f fees as the adviser does not guarantee the advice.
3. Payment of an adviser must be totally divorced from the product supplier (asset manager) and the annual management fee must be clean. As an investor, I want to pay exactly the same for a product with or without an adviser to enable me to evaluate the cost effectiveness of the plan and advice of an adviser.