Moonstone: Performance Fee Disclosure Standard
What will you tell your client if he or she wants to know how performance fees are calculated on the investment you suggested? Can you explain in layman’s terms what a “high-water mark” is, and what “hurdles” refer to, or do you get stuck on “Huh?”
The second quarter edition of the printed magazine Personal Finance (volume 39) contains an excellent article entitled “Paying for performance” which discusses in detail the various fees charged by asset managers. While few advisors or clients pay too much attention to this cost aspect when markets are doing well, the current investment climate makes it essential for us to know what our clients are paying for. We suggest that you make an effort to get hold of a copy of the magazine referred to above for a more in-depth discussion on the subject.
John Kinsley, Chief Operating Officer at Prudential Portfolio Managers (South Africa) very kindly assisted in drawing up a summary of the existing ASISA “Performance Fee Disclosure Standard.” Kinsley point out however that you should bear in mind that the Standard is still an ACI Standard and is currently being reviewed by ASISA.
The attached summary document should form part of any discussion; as Kinsley points out, it would be wise for advisers to provide at least this minimum information to their clients when drawing up an investment plan.
As Pink Floyd may have put it if they were in the business: all in all its just another brick in your risk management wall to safeguard your interests.
Our sincere thanks to Prudential Portfolio Managers for their assistance.
Please click here to download the document which you can personalise for your own use.
