A Fin24 user wants to know what is a reasonable fee to pay a financial adviser. He writes:
What is a fair and reasonable upfront and annual fee for my financial planner to charge on my investments?
Advocate Dries Bekker, national head of Sanlam senior market advice and support, responds:
Cost surely can erode the performance or returns of an investment over time, so it makes sense to ask what the cost of your investments should be.
When investing, the client will find that different costs apply to different products. Factors that may influence product cost include:
This by no means represents a closed list, and different products may lead to added or reduced costs. This is why you as the investor need to make sure of the returns you should expect after costs have been deducted.
- Does the product include a guarantee?
- Is it fully liquid? Some products are for a fixed term and may have early termination penalties.
- The underlying assets you invest in may also boost cost, as it is usually cheaper to invest in interest-bearing funds compared to equity or international funds.
- Does the product offer exposure to external fund managers, as this usually comes at an increased cost?
- Is it a discretionary investment or does it relate to the investment of retirement funds? The latter usually puts a limit on the fees that may be taken.
Product quotations will usually provide such an indication, but you must note that this does not include the advice fees being paid to the investment adviser.
Depending on the type of product, the investment adviser may again receive an upfront commission and/or a recurring advice fee.
On discretionary investments, the adviser may usually take a larger upfront fee while in the case of retirement products this is limited to a maximum of 1.5%.
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