It’s critical to assess all fees before you invest - and one simple question can trigger full transparency from your service provider.Here’s why it’s crucial to ask about your Effective Annual Cost - and how it might save you in the long run
But financial investing can be infuriatingly complex and understanding how much you’re paying in real terms on products like living annuities, retirement annuities, and preservation funds is overwhelming at best, deliberately opaque at worst. Fortunately, there is one way to trigger a full and honest response about how much you pay in fees for a financial product.
“When some hear their EAC is 3%, they think it sounds fairly competitive, especially when erroneously compared to a figure of 100%,” says Rossouw. The long-term impact of fees, compounded over 15 years or longer, can also have a significant impact. Fees may start out at 3% now, but it’s important to remember how high they’ll be further down the line.
“You can do all the hard work, determine a good strategy, put all the money in from decades of hard work - but if you’re misled by high fees, it leaves a big hole for your returns to be siphoned out,” says Rossouw.