Weekend Argus (Saturday Edition) - - GOODPUZZLES -

When you in­vest on the ad­vice of an ad­viser, the ad­viser has to earn some­thing for ad­vis­ing you.

The ad­viser may earn com­mis­sion that is paid by the prod­uct provider. This is typ­i­cally the case with poli­cies that have penal­ties if you break the con­tract by stop­ping or re­duc­ing your con­tri­bu­tions be­fore the term is up.

The ad­viser can charge a pro­fes­sional fee per hour or a monthly re­tainer.

Most ad­vis­ers, how­ever, charge a initial fee for a fi­nan­cial plan and an on­go­ing fee based on how much you in­vest on their rec­om­men­da­tion (known as a fee based on as­sets un­der man­age­ment).

If you in­vest in a pol­icy with un­der­ly­ing in­vest­ments, or on an in­vest­ment plat­form, you need to con­sider the to­tal cost of all the fees, in­clud­ing:

◆ The ad­viser’s fee. Re­mem­ber that in­vest­ing through an ad­viser could re­duce the fee you pay to an in­vest­ment plat­form.

◆ The plat­form fee, which is typ­i­cally on a slid­ing scale, de­pend­ing on how much you in­vest.

◆ The as­set man­age­ment fee on each un­der­ly­ing fund. This could be ei­ther an on­go­ing fee or a per­for­mance fee.

You should also be aware that:

◆ Some unit trust com­pa­nies pay re­bates to the plat­form provider that may or may not be passed on to you in the form of a lower plat­form fee or a lower as­set man­age­ment fee.

◆ Some in­vest­ment plat­forms of­fer what is known as “all in” fees that in­clude the fund or as­set man­age­ment fee, the ad­vice fee and the plat­form fee.

An of­ten-quoted statis­tic is that, at a to­tal fee of 2.5 per­cent, you will for­feit 40 per­cent of your in­vest­ment re­turn over 40 years. – Laura du Preez

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