What Are You Really Paying in Investment Fees?

Two of the questions I get asked most often?
“What’s your take on Bitcoin?”
“What exactly am I paying in investment fees?”

Today we tackle the second one - and break it down in plain English.

There are three types of fees you’re likely paying:

1. Fund Management Fee

2. Platform Fee

3. Advisor Fee

1. Fund Management Fee

This is the fee charged by the team managing the fund you’re invested in. If you’re invested in Satrix MSCI World, then Satrix is the fund manager.

The biggest differentiator here is whether your fund is actively or passively managed.

Important: Don’t stress too much about this fee - it’s already included in the performance reported on the fact sheet.
So if a fund made 12%, and the fee is 0.5%, it’ll just show 11.5%.

Which one’s better? It depends.

Cheaper DOES NOT mean better. Our strategy?
✔Use (mostly) active funds locally - the South African market is inefficient, so there's room to generate alpha.
✔ Use (mostly) passive funds offshore - where markets are efficient and its harder to beat the market.

Want to learn more about how we build portfolios? Feel free to reach out.

2. Platform / Admin Fee

This is what you pay to the platform that houses your investment. It covers admin, transaction processing, and communication.

Providers: Allan Gray, Sygnia, Old Mutual, Coronation, Ninety One, PSG, EasyEquities, etc.
Typical cost: 0.1% to 0.5% py, depending on your platform and investment size.

Here’s how it works at Allan Gray (where I invest client funds):
The fee is based on a downward sliding scale, meaning as your investment grows, the % fee reduces.

3. Advisor Fee

Each advisor has a different costs and value propositions.

• Some charge consultation or fixed fees

• Some take a once-off upfront fee

• Most charge an ongoing fee, typically 0.5% to 1% annually

Should you even have an advisor?

Like in any industry, the skill level of consultants can vary significantly across the board.
But just like having a great doctor or lawyer, having a great advisor (and tax specialist) is crucial if you’re serious about building and protecting your wealth.

A Typical Fee Structure:

Here’s a breakdown of the typical fee structure:

1. Investment Management: The average fee of the underlying funds in one’s portfolio.

2. Admin fee: The charge to facilitate one’s investments on a platform.

3. Advice fee: The fee payable to one’s financial advisor.

Example: Your total portfolio generated 15% over the last year. The 0.92% average fee of the underlying funds is ALREADY factored in (as indicated on the fact sheets) so the 15% is thus net of fees.

Now we deduct 0.20% platform fee, and 0.58% for the advisor that provides ongoing financial support. The net gain on your investment will be 15% - 0.20% - 0.58% = 14.22% for the year.

Are you Paying Too Much?

Let me know if you'd like help reviewing your fees or portfolio - I’m happy to take a look.

(Disclaimer: This isn’t financial advice. Just clear guidance from someone who’s seen the difference a good plan makes.)

Who Are We?😎

Paul Roux

Ingrid Kluckow

Our Full Offering🎖️

We have extended our value offering to five key pillars:

1. Investments

2. Insurance

3. Arbitrage

4. MoneyMoves

5. StockMaster (coming soon!)

If you’re looking for someone to chat about your finances, feel free to reach out. We’re here to help.

Thank you for trusting us with your wealth. If you have any questions, want to review your portfolio, or just want to chat about what’s happening in the markets, feel free to reach out anytime.

Warm regards,
Paul & Ingrid
Sentient Wealth