You can invest:
There are a number of ways you can invest in a unit trust fund - depending on how much choice you want and whether you need advice. You can invest:
1. Directly with the unit trust management company
You can invest in a unit trust directly with the unit trust management company offering the fund.
Investing directly is most suitable if you know which fund you want to invest in. Some unit trust companies will not accept direct investments and will refer you to a financial adviser.
Some unit trust companies have their own investment platform for their own funds and you can do the transaction electronically.
Some of these platforms have a robo-advice tool or chat bot to assist you in selecting the right fund.
If the unit trust management company does not have a robo-advice tool and you ask for advice about which fund to select, you will most likely be referred to a financial adviser.
2. Through an investment platform
You can invest through an investment platform referred to as a linked investment services provider (Lisp) which gives you access to a range of unit trust funds from different unit trust companies on the platform.
An investment platform or Lisp is like going to a unit trust supermarket instead of shopping at each brand’s own shop – you can access many funds from different management companies in one place. You may also get access to offshore funds, shares, private equity funds or structured products.
Investment platforms have their own minimum investment amounts and some cater for investors with large amounts to invest either directly or through an adviser, while others target the smaller investor who is just starting out, particularly those interested in exchange traded funds (ETFs).
The benefits of using these platforms are that you deal with a single provider and get a single statement and tax certificates for investments with multiple management companies – this makes your personal administration easier.
You can switch between funds easily without the hassle that comes with being paid out the cash and then reinvesting it in a new fund with a new company. Some platforms charge a fee for switches. Some allow you a certain number free each month.
You pay an investment platform fee to use an investment platform, but typically this is partially or wholly offset by a lower ongoing fee on your unit trust than if you invest directly with the unit trust management company.
Investing directly on an investment platform – without the help of a financial adviser - is suitable if you know which fund or funds you want to invest in. The platform cannot give you advice about the funds in which to invest and if you ask for advice you will be referred to a financial adviser.
3. Through a financial adviser
Financial advisers can help you find a suitable fund for your investment needs. Using an adviser will incur a fee – a few charge an hourly rate for advice, but most charge an ongoing fee that is a percentage of your investment.
Most South African advisers also recommend accessing unit trust investments through an investment platform that offers access to a range of funds.
Financial advisers who are tied agents of a financial institution are likely to recommend the investment platform offered by the group to which they belong.
Independent financial advisers typically choose one or two platforms to recommend to their clients and this may benefit you as you may be entitled to a discounted ongoing management fee as a result of the size of the investments your adviser brings to the platform (Read more about fee classes).
The fee class you qualify for by investing through a financial adviser may also offset some of the fee you pay to that adviser, or the fee incurred if your adviser uses what is known as a discretionary fund manager or discretionary investment manager to select and blend underlying funds for you.
4. Through a robo-adviser
Robo-advisers are online sites or apps that help you identify unit trust funds that suit your needs.
They automate the process that a financial adviser will take you through to identify your needs or goals and how best to reach them.
Using a robo-adviser may be better than not getting any advice at all and it may be cheaper than using a human adviser. However, the simpler and quicker the process, the less comprehensive the analysis of your financial needs and circumstances will be. This could result in a less optimal outcome for you.
Robo-advisers are most suitable if you are just starting on your investment journey or you have a single goal you want to meet, like saving for a holiday, a house or a wedding.
| Why do I have to fill in FICA documents when I invest?
The Financial Intelligence Centre Act aims to prevent criminals from laundering money or funding terrorist activities by ensuring that certain institutions, such as banks or investment houses, and professionals, such as estate agents and lawyers, know their clients and the source of any money they use for transactions such as buying property or investing. Investment managers, including collective investment scheme managers, are regarded as accountable institutions who have to know their clients. Typically, this means you have to provide a company offering a collective investment scheme with proof of your identity and address and state the source of the money you are using to invest. |
