What are all the de­duc­tions?

Mail & Guardian - - Business -

Never heard of half of the fees men­tioned in this piece? Here’s a brief ex­pla­na­tion of each one.

O Plat­form fee: The fees charged by a plat­form that al­lows in­vestors ac­cess to var­i­ous funds and types of in­vest­ments (rang­ing from unit trusts to stocks and ex­change traded funds and oth­ers). This typ­i­cally in­cludes a set-up charge, an an­nual charge and deal­ing charges (fees for buy­ing and sell­ing in­vest­ments). It can also in­clude other charges such as monthly or an­nual fees, div­i­dend rein­vest­ment fees and so forth.

O Fi­nan­cial ad­viser’s com­mis­sion: This is a pre­mium or con­tri­bu­tion-based com­mis­sion. Ev­ery time you con­tribute to­wards your in­vest­ment, your fi­nan­cial ad­viser is paid a per­cent­age of that in­stal­ment. De­pend­ing on the in­vest­ment prod­uct, this could be be­tween 3% to 5% of the con­tri­bu­tion made.

O Fi­nan­cial ad­viser’s trail fee: This is also known as an an­nual ad­vice fee. In­stead of pay­ing a per­cent­age of your pre­mium ev­ery month, your fi­nan­cial ad­viser takes a cut of your to­tal ac­cu­mu­lated fund ev­ery month. It’s usu­ally cal­cu­lated monthly and then charged an­nu­ally. Typ­i­cally, this ranges be­tween 0.5% and 1%. But even though the charge is overtly lower than com­mis­sion, for a longterm in­vest­ment, this kind of fee can take out even more of your sav­ings than a tra­di­tional com­mis­sion fee.

O Dis­cre­tionary fund man­age­ment fee: A fee charged by an as­set man­ager who in­vests in a va­ri­ety of funds and se­cu­ri­ties on be­half of their client. Typ­i­cally, an “as­sets un­der man­age­ment” (AUM) fee is charged. As the com­pany’s as­sets un­der man­age­ment in­crease, so the AUM fee will go up. Fees vary greatly — you could be pay­ing any­thing from 0.1% to 4%.

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