Fees - know what you’re paying for

Investors should know what they are paying for, what value they are getting in return and should compare prices of different advisors and asset managers.

In the financial services industry this is often not easy to do, with complex and confusing fee structures.

“Our fees are transparent, and we encourage investors to compare our fees to anyone else out there,” says Grant Locke, MD of OUTvest.

“We report on all the fees you pay in any investment with us. No more hunting across all your documents, and making phone calls to understand the true cost of your investment,” says Locke.

“When you do compare our fees, we know you will be pleasantly surprised.”

OUTvest uses a passive investment strategy, which in general is less costly than that of active investment strategies.

This is largely because the building blocks of the unit trusts offered by OUTvest are index trackers. An index tracker does exactly that, it tracks an index.

An index reflects the aggregate performance (which includes capital growth and dividends) of a basket of securities (or shares).

Examples include the JSE All-Share Index, which tracks the performance of all the shares listed on the JSE, or the S&P South Africa 50 Index, which provides exposure to the largest 50 companies on the JSE by size.

With S&P Dow Jones Indices, the world's largest index provider, and CoreShares, a leading South African passive investment manager, the OUT-indices and -funds were developed.

 “OUTvest has simplified the world of investing by replacing the job of hundreds of unit trusts and investment strategies with just five, highly efficient, low-cost unit trusts,” says Locke. “We knew from the beginning we needed highly efficient and low-cost funds, and one of the best ways to achieve this is through passive investing”.

Costs and fees can have a major impact on the return of an investment.

A difference of 1% in fees over 20 years can amount to substantially more money in an investor’s pocket, as the below graph shows:

Is a 1% cost differential really such a big deal?

Source: ETFSA (Note: Based on 10% return p.a. before fees)

OUTvest’s low fees gives an investor access to professional financial advisors, a paperless administration system, specialised intelligent investment funds and a scientifically developed digital advisory system.

The fees are based on the total value of your investment and are charged on a sliding scale, with a minimum fee of R5 per month for advice and administration services. The fees are collected monthly and deducted automatically from your funds.

Click here to make use of the OUTvest fee calculator to see what you will be paying compared to traditional investing.

For example, if you invest R2 000 per month, or R24 000 per year, with OUTvest, you will only pay R31 per month, or R367 per year, in fees. This is R233 less per year than the R600 you will pay with traditional investing.

Your ongoing monthly advice, administration and investment fees (as per the example):

Ongoing advice is R12 per month or R144 per year (0,6% of your investment). This includes the use of our digital advice service, which includes digital annual reviews and access to advisors and goal tracking services.

Ongoing admin is R12 per month or R144 per year (0,6% of your investment.) The administration charge is levied separately and covers all administration and management of your investment with OUTvest, including processing your instructions, new accounts, changes of details, payments and tax reporting.

A combined minimum fee of R60 per year will be charged for advice and administration fees.

Ongoing investment fees will be R7 per month or R79 per year (0,3% of your investment)

CoreShares and Granate, the specialist investment managers, are paid an ongoing investment management fee to manage the funds on OUTvest’s platform.

The investment management fee is known as the Total Expense Ratio (TER) and includes the service charge from the investment manager and other fees necessary to manage a unit trust.

Switching fees: Some advisors and administration providers charge a switching fee if you want to switch between various investment funds, but OUTvest does not charge for this.

Upfront advice fees: Some advisors charge fees for setting up your investment plan; up to 5% of the value of your investment.

OUTvest does things differently and never charges you any upfront advice fees, so you put more of your money into your investment.

Performance fees: These fees are common in the industry and are linked to the performance of a fund. The better the fund manager does, the greater the fees. Some performance fees can even be as high as 2.5% of your investment per year.

This fee can have a major impact on your investment – that’s why OUTvest never charges you performance fees.

Cancellation or transfer fees: In some instances, you might be charged a cancellation fee or incur a penalty when you transfer your investment to another provider, or cancel your investment, but OUTvest will never charge you this fee. 

The investment industry has developed a standard way to present fees to help clients better understand and compare the investment fees they are being charged. This is called the Effective Annual Charge (EAC).

The EAC breaks up all the charges or fees that financial services providers charges you for investing into the following four categories:

1. Advice,
2. Administration
3. Investment Management
4. Other.

These fee categories are then added together to form a single estimated total fee known as the EAC. The EAC effectively provides a good estimate of the total fee that you can expect to pay for investing with a particular advisor.

*The charges listed above are exclusive of Value Added Tax. It is expressed as an annualised percentage. The effect of some of the charges may vary, depending on your investment period.

The EAC calculation assumes that an investor terminates his or her investment in the Financial Product at the end of the relevant periods shown in the table.

Speak to one of our financial advisors and start your investment journey.