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Question of the Day: Have you ever been to an airshow?
EAC numbers from RA revealed.
- Thread starter fire2029
- Start date
You already know the answer to that (unless you’re their advisor).
So the argument is "Perhaps that 4.2% equates to R500 or R1000 for the year. Is that high for professional services? "
Yeah, well if your retirement savings are R24k, you've got bigger things to worry about than fees.
zerocool2009
Honorary Master
The only parties smiling their are the business and the broker, not the client ! Section 14 is calling !
supersunbird
Honorary Master
Look to switch. there are index providers that will do it for under 1%, and managed ones for about 1.5%.
Part of the problem is that you generally procure these products whilst your savings are still low. So that advisor fee of 1% (or R5 in 1997) seems low (Frikkie the FA needs to eat), but off coarse it does not get adjusted and in 2020 that 1% is suddenly R20,000 per annum.
Same applies to EAC - it matters a lot more later on when people are less likely to reevaluate the decision.
Same applies to EAC - it matters a lot more later on when people are less likely to reevaluate the decision.
supersunbird
Honorary Master
Rather give the money to a business who can run it on 1% vs 4.2%. Remember, it's the earliest money contributed that does the most compounding at the end.
Polly101
Expert Member
and all of a sardine your monthly expenses are 20% of your monthly investment FML
beefymoocow
Expert Member
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- Jun 19, 2006
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Remember 4.2% includes withdraw fees of the fund in the 1st year. You need to look at the 2.7% which excludes the early termination. Which is still high of course.
Good point. Begs the question, why are the withdrawal fees so high.
Withdraw fees are high because insurance companies incur most of their expenses on a policy at inception, i.e. when you start the policy. They then assume they will recoup these expenses over the life of the policy 25 - 30 years in the case of an RA. If you come along after 6 months and cancel then they have a problem, hence the penalty.
Why are new entrants in the market - 10x, EasyEquities, Outvest able to forego these high initial expenses. Are the old insurance companies operational costs simply too high at initiation given they rely on manual admin? Your insight is appreciated.
supersunbird
Honorary Master
Commissions paid to the sales agents (aka the life insurers financial advisors).
As Supersunbird has already mentioned commissions do make up quite a bit of the upfront payments but insurers are able to claw some of this back so the policyholder wouldn't be expected to cover all of the commission.
Technology is playing a big role especially in facilitating direct business. Companies are relying on investment in platforms that allow customers to effectively service themselves by going on online and changing policy details, capturing information etc...
That being said, financial products are inherently complex so most people would benefit from receiving advice before making their purchasing decisions or updating their cover.
Back to the issue of the new entrants, it would be difficult to say, with certainty, whether there are no hidden fees without seeing the terms and conditions of the actual policy.
For the sake of full disclosure before any of us here choose to put any weight into your opinion, could you advise whether you work in the industry and/or have a vested interest persuading people that the current fee structure is not too high.
I ask as your narrative is very similar to that of my FA that did not see any problem with taking a Financial Advisors fee of 3,42% and was willing to reduce this to 1,5% after I queried it.
Regardless to say I did not take him up on his very kind reduction of 60% in fees.
The finance industry loves to complicate simple matters to justify their high fees!
Reg: new entrants.
Confusing & hidden fees have created a market gap. And a few companies (e.g. 10x) are using this to their advantage.