Page 80 - Profile's Unit Trusts & Collective Investments - September 2025

Chapter 4 The CIS industry

What is a LISP?
A linked investment service provider (LISP), also known as an investment platform, is a financial
institution which packages, distributes and administers a broad range of unit trust-based
investments spanning voluntary to retirement planning products. Any investment made
through these platforms provides a client a single entry into a selection of investments which can,
with the help of a financial adviser, be used to create a suitable portfolio. Note that LISPA (the industry
association for LISPs) merged with the ACI, the LOA and IMASA to form ASISA in 2008.
behalf of clients in units in a collective investment scheme on the basis that such units are purchased
and held in bulk or repurchased in bulk”.
LISPs have been described as “unit trust warehouses” or “fund supermarkets”. They play a
significant role in the industry, and have at times been responsible for up to half of all inflows into unit
trusts and over a third of all assets under management.
A LISP can be registered as a discretionary or non-discretionary service provider. A discretionary
service provider makes and implements investment decisions on behalf of clients, whereas a
non-discretionary service provider provides facilities for buying, managing and switching
investments but does not get involved in decision making.
Most of the bigger, more successful linked product companies are associated with banks or life
insurance companies and use the bank’s client base to sell their products. LISPs offer two main
advantages to investors. The first is the ability to buy units across a wide range of management
companies through one service provider. The second is the ability to switch cheaply from one fund
to another across the industry (ie, not just within one management company).
LISPs have been largely responsible for the narrowing of the gap between wholesale products and
retail products. In the late 1990s, retail investors paid initial charges of 5% while wholesale rates (to
institutional clients) were a fraction of a percent. By negotiating wholesale rates and passing these
on to the retail market, LISPs changed investors’ perceptions of what they should pay in charges.
Competition amongst LISPs has been an important factor in a broad industry to move away from
initial fees. LISP online platforms have also contributed to downward pressure on annual fees.
If this is a positive influence of the LISP movement, one negative has been the increased churning
in the industry. The term “churning” derives from the 1980’s bull run when certain US brokerage firms
were guilty of buying and selling shares aggressively for clients, mainly to earn brokerage fees, and
with little concern for investment performance. Switching on the Momentum investment platform or
LISP in 2021 resulted in an annualised behaviour tax of 3.5% for investors amounting to more than
R90m, the company has reported.
Churning appears to have been less of a problem in recent years, although some commentators
are still concerned that unit trust portfolios in the hands of investors are generally adjusted too
frequently.
Retirement products
LISPs have also largely been responsible for enabling the development of retirement funds and
living annuities that offer members or annuitants a choice of underlying unit trust investments.
For individuals, most LISPs offer retirement annuities (RAs), investment-linked living annuities
(ILLAs) or preservation funds with a choice of underlying unit trusts. In the case of RAs and
preservation funds, the unit trusts need to be those that comply with Regulation 28 or the choice
of funds in the product must comply with Regulation 28. The only exceptions are for older RAs or
preservation funds that were established before and have not been amended since complaince with
Regulation 28 on an individual, rather than fund level, became a requirement in 2011.
The growth of umbrella retirement funds – offering employers the option to participate in
professionally managed and cost-efficient funds established typically by financial institutions –
has also resulted in growth in the number of retirement fund members who are offered a choice of
underlying unit trust investments for their retirement savings.

78 Profile’s Unit Trusts & Collective Investments September 2025