Why should a reader pay upwards of 2.5% in fees to players in the pension fund chain when he could manage a regulation 28-compliant fund himself?
16 February 2023 - 05:00
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Reader Paul Miller wants to manage his own personal share portfolio. Picture: 123rf
Question:
Many relatively financially sophisticated individuals have collected preservation and provident funds over their careers and either kept them invested or transferred them to preserver options.
For most people, a balanced fund compliant with regulation 28 of the Pension Funds Act, or a regulation 28-compliant discretionary fund management portfolio, is probably fine. But I object to paying upwards of 2.5% total fees to all the players in the chain when it is not hard to manage regulation 28 compliance (and a suitably diversified portfolio) yourself. It is only a simple formula, after all.
I have a fund of exchange traded funds with Sygnia which I manage myself, total cost 0.58%. EasyEquities has a similar product. But I would like to include a direct share portfolio for the equity portion in one of the funds. I believe Momentum Securities and Sanlam Private Wealth offer this type of product, which is called a personal share portfolio.
I know it is not in the interests of the financial services industry, especially independent financial advisers and the big institutions, for me to do this — that is, manage my fees down and handle the investments myself.
But how can I find out more about this kind of product, bearing in mind the vested interests of those who generally provide “advice”?
— Paul Miller
Answer:
We understand that you are a sophisticated investor and want to make sure you are not paying excessive fees.
There is a place for both DIY and managed retirement solutions, and it is important to carefully consider the advantages of self-management (mainly the low fees) against opportunity costs such as time and complexity, compliance, the implications of getting it wrong, and access to an investment universe.
You are correct that there are not many personal share portfolio options, largely a result of the potential complexity. With more education, there may be more appetite for this kind of product.
When considering a personal share portfolio, we suggest you consider the ease of expressing an investment strategy on the platform, any liquidity constraints, the investment universe, tools to ensure compliance with regulation 28 and the total cost of trading, including bid/offer spreads.
— Deresh Lawangee, CEO of EasyEquities Retire
Get in on the debate! We want to hear what ideas you may have on this issue, so please send your thoughts to yourmoney@fm.co.za
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
READER LETTER OF THE WEEK
YOUR MONEY: Doing regulation 28 my own way
Why should a reader pay upwards of 2.5% in fees to players in the pension fund chain when he could manage a regulation 28-compliant fund himself?
Question:
Many relatively financially sophisticated individuals have collected preservation and provident funds over their careers and either kept them invested or transferred them to preserver options.
For most people, a balanced fund compliant with regulation 28 of the Pension Funds Act, or a regulation 28-compliant discretionary fund management portfolio, is probably fine. But I object to paying upwards of 2.5% total fees to all the players in the chain when it is not hard to manage regulation 28 compliance (and a suitably diversified portfolio) yourself. It is only a simple formula, after all.
I have a fund of exchange traded funds with Sygnia which I manage myself, total cost 0.58%. EasyEquities has a similar product. But I would like to include a direct share portfolio for the equity portion in one of the funds. I believe Momentum Securities and Sanlam Private Wealth offer this type of product, which is called a personal share portfolio.
I know it is not in the interests of the financial services industry, especially independent financial advisers and the big institutions, for me to do this — that is, manage my fees down and handle the investments myself.
But how can I find out more about this kind of product, bearing in mind the vested interests of those who generally provide “advice”?
— Paul Miller
Answer:
We understand that you are a sophisticated investor and want to make sure you are not paying excessive fees.
There is a place for both DIY and managed retirement solutions, and it is important to carefully consider the advantages of self-management (mainly the low fees) against opportunity costs such as time and complexity, compliance, the implications of getting it wrong, and access to an investment universe.
You are correct that there are not many personal share portfolio options, largely a result of the potential complexity. With more education, there may be more appetite for this kind of product.
When considering a personal share portfolio, we suggest you consider the ease of expressing an investment strategy on the platform, any liquidity constraints, the investment universe, tools to ensure compliance with regulation 28 and the total cost of trading, including bid/offer spreads.
— Deresh Lawangee, CEO of EasyEquities Retire
Get in on the debate! We want to hear what ideas you may have on this issue, so please send your thoughts to yourmoney@fm.co.za
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