(By actually looking at them)
The employee benefit retirement savings industry is changing. Long gone are the days where double digit growth comes standard, education to members are minimal and unqualified advisers can attend to your employees’ valuable retirement savings.
It has become an area of expertise and the review and cutting of fees are now more important than ever.
At Bovest, our Employee benefit team are on a mission to cut costs and add value via education to ensure that more than the current 6% of South Africans will be able to reach retirement with enough money.
When it comes to employee benefits, there are 4 types of fees that can be charged:
Can be charged as % of Salary or % of Assets. This will make a SIGNIFICANT difference in years to come.
-Risk cover fees
Seems straight forward, however these fees can seem very low as certain companies cross-subsidise these fees with fees in other areas.
Commission is charged as per a standard scale and an additional asset consulting fee can be negotiated. Make sure all fees are transparent and disclosed.
-Asset management fees
The BIG sinner. Most often not even mentioned on the quote and clients and advisers alike pay little attention to it as it happens “behind the scenes” and slowly eat away large chunks of the ‘would be’ returns. There’s also a big drive Internationally to use Passive funds as means to lower fees.
We have recently done fee comparison exercise for a couple of prospective client and the findings where astounding, if not criminal.
Here’s an example of 3 competitors, each with their own way of distributing fees. This make it very hard for clients to compare.
The last company we reviewed, managed to cut their fees by over 1.5% of a member’s salary!
This might not seem like a lot but saving 1.5% in costs for a person than earns R30 000/month for the next 20 years, will accumulate to an extra R550 000 at retirement.
If a person has 30 years to retirement, that’s almost a R2 million difference, just by cutting on fees.
An example of the difference in fees over the long term.
To re look at your structure ensure you contact an experienced and qualified adviser who’s independent and specializes in this field and can compare total costs in the short and long term.
Questions and comments are welcome.
Geo Botha B.com CFP
Geo has over 8 years’ experience in the employee benefits space and was awarded consultant of the year on two previous occasions.
Contact us at email@example.com or 012 998 6428