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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.

F Coet­zer


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