Page 66 - Profile's Unit Trusts & Collective Investments - September 2025

Chapter 3 Costs and pricing

Table 3.4
Illustrative total retirement savings costs (RSC) as a percentage of assets
Charges 1 Year 1 to 3 Yrs 1 to 5 Yrs 1 to 10 Yrs
Investment management 1.20% 1.20% 1.20% 1.20%
Advice 0.50% 0.50% 0.50% 0.50%
Administration 0.95% 0.95% 0.95% 0.95%
Other 0.30% 0.30% 0.30% 0.00%
Total RSC 2.95% 2.95% 2.95% 2.65%
Many financial advisers are partnering with discretionary fund managers (DFMs) who select and
blend investment portfolios for their clients. DFMs also charge investors a fee when they manage
portfolios on investment platforms for clients. Alternatively, they create their own multi-managed
unit trusts and their fees are included in the ongoing fees on these funds.
Investing through a platform often changes the way fees are applied somewhat. The main
implications are:
R Underlying fund fees may be less
R An additional layer of costs will be imposed by the LISP and the DFM
As we will cover later in this chapter, funds often have multiple unit classes with different fee
structures. The unit classes made available to bulk buyers, like LISPs, typically have lower fees
(and lower TERs) than retail classes. This means that the investment performance of a fund bought
through a LISP, if platform fees are ignored, will be slightly better than the performance of the same
fund’s retail class. However, the net performance of an investment via a platform may be less
attractive after paying the LISP fees.
It’s important to note that performance tables (including rates of return) published by stats
providers, like ProfileData, do not factor in platform fees. Generally the fund performance figures
available on LISP websites are also, ironically, shown before the impact of LISP costs (ie, returns to
the LISP client are lower than shown).
Similarly, the fee information shown for underlying funds on a platform website (such as TERs and
TICs) pertains to each fund and does not include the LISP fees that will be levied over and above the
fund fees. The costs reported by a platform under the EAC model should, however, capture both the
underlying fund costs and the costs of the platform itself.
As we saw earlier, the annual fees of a fund manager are deducted from the portfolio, which means
the NAV unit price is net of manager fees. But a LISP’s ongoing fees are deducted from the client’s
LISP account. To cover their fees, LISPs will sell units of funds in the client’s portfolio if there is no
cash in the client’s account.
Unit classes
While looking at pricing, it must be noted that a collective investment scheme can have different
classes of participatory interests. Looking at this from the point of view of unit trusts, these are
usually known as A, R, B and C classes, although a fund is not restricted to these classes, and can
create others.

Knowing your ABCs
Historically, unit classes have followed tacit rules: A for retail funds, B and C for institutional
funds, and so on. It’s important to note that these “rules”are not an industry requirement
– managers can in fact use any letters or numbers to differentiate unit classes. (The only
exception is R, which denotes a regulated class and identifies fund classes established before June
1998.) Exercise caution, therefore, before drawing conclusions about retail and institutional classes
based on alpha codes.

64 Profile’s Unit Trusts & Collective Investments September 2025