A Fin24 user wants to know if he can cut down on management fees by trading his Satrix Divis directly on the JSE. He writes:
I have a question related to Satrix exchange-traded funds (ETFs).
I currently have about R800 000 invested in the Satrix Divi fund. I have made this investment directly with the Satrix manager over the last couple of years. I also have an investment account with Standard Bank.
My question is this: since the Satrix managers take about 0.5% management fees per year of my investment, will I be better served by buying my Divis directly on the JSE (bearing in mind that this will incur no extra management cost for the investment account)?Brett Landman, CEO of Satrix Managers, responds:
As a security listed on the JSE, Satrix ETFs can be bought and sold through a stockbroker or online trading just like any other listed security.
To facilitate access to Satrix by investors who do not have a stockbroker or online trading account, Satrix established the Satrix Investment Plan (although any investor can choose to buy Satrix shares through the plan), which is essentially an investment administration platform.
Satrix shares acquired or sold through both the Satrix Investment Plan and/or a stockbroker (or online trading account) are settled through a trade on the JSE (the secondary market).
In the case of the Satrix Investment Plan, the administrators instruct a stockbroker to effect the buy and/or sell orders (as the case may be) "through the JSE" in carrying out the instructions of investors in Satrix through the Satrix Investment Plan.
However, different cost structures and functionalities apply to each of these methods of buying Satrix securities.
The minimum investment in Satrix through the Satrix Investment Plan is a R1 000 lump sum and/or a R300 per month debit order (a debit order fee of R3.50, excluding VAT, is applicable).
The brokerage charge applicable to a trade through the Satrix Investment Plan is 0.10% (excluding VAT), as well as nominal Strate and investor protection levies.
The Satrix Investment Plan also charges an annual administration service fee to remunerate the administrators for handling the investment on the investor's behalf (processing applications, instructing the stockbroker, custody fees, quarterly statements and tax certificated, etc).
This annual administration fee is charged at a sliding scale, based on the value of the investment (0.75% down to 0.35%, excluding VAT).
In the case of an online trading account offered by banks such as Standard Bank, the fee structure differs from institution to institution.
Generally brokerage is charged at a rate higher than that charged by the Satrix Investment Plan (and the usual Strate and investor protection levies apply).
A charge of about 0.50% is not uncommon, but can be lower for “preferred” clients such as private banking clients. Also, a minimum trading fee is generally applicable for each trade. A monthly account maintenance fee is also payable.
Stockbrokers/online trading accounts generally don't facilitate investments by way of a monthly debit order, nor do they generally provide for the automatic reinvestment of dividends (if required), as offered by the Satrix Investment Plan.
On the other hand, a stockbroker offers a stop loss facility which is not available through the Satrix Investment Plan.
To conclude, you as the investor should establish which point of access (Satrix Investment Plan or stockbroker/online trading account) is most cost effective and the best fit for your specific needs.
The size and frequency of trades would be an important determining factor in choosing the platform which will give you the most bang for your buck.
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