Advice and fees: you should choose

And now the third generation of savings products, that gives you the choice, as if you never had it before. Coronation says that fund managers should'nt be making money from administration fees or penalties, but rather from performance. Now there is a nov

Pieter Koekemoer from Coronation Fund Managers explains the difference between the various savings generation products that are available from one, two and three.

We all know about 1 and 2, and now there isthree, offered primarily by the fund manager, which according to him is about performance and simplicity. The differentiator in the third generation option is essentially about advice and advice costs, where advice is optional and thus the costs are also variable.

While advice is important we are moving into an environment where consumers should have a choice and not be forced to take advice from a third party. This is for the direct market, which are prepared to take responsibility, says Koekemoer.

The local market is ready for financial services products are bought and not sold, where the intermediary is the key market. A product offering that is attractive to investors themselves.

Essentially if you are in a first generation product, your fee exposure is rather excessive, especially as fees are broken up into new names for an administration fee. There is the initial fee, the marketing fee, and then of course the admin fee.

The second generation product, offered by the Linked Service Providers (LISPS) are lower but still not supposedly as cheap as the third generation of savings product.

The fees that they plan to introduce are transparent and according to him the profit that the fund manager should make, should be based on performance, not fees charged to investors.

They can live with the risks that investors might want to move to another fund manager as the receiving company has to pay for the costs. The underlying value of a 1st and 2nd generation products also becomes complicated, especially when the underlying investment doesnt have a market value.

Added to which they dont see the need to penalize clients or investors that may want to move to another fund manager.

Nick Battersby, operations manager at Coronation, says that they are using an outside administrator, who has a track record and long history. The wrapping is more technical but the structure is more transparent. All client interaction is via Coronation, the administrator doesnt get involved at the client level.

Koekemoer maintains that their new offering is due in part to the change of ownership in the business last year. Management essentially took over business control and there is a new focus on sustainability and longevity, as apposed to short term returns, he says. The retirement business has a long life cycle, in the region of 40 years.

Health warning: For those of you looking for retirment funding, investments or any other financial instruments, and are not a financial advisor, seek someone out who can do a comprehensive needs analysis and develop a 360 degree plan and strategy.