106) Is Unit Trust Initial Service Charge really that HIGH???

106) Is Unit Trust Initial Service Charge really that HIGH???

Some UTCs were discouraged when potential investors mentioned that the 5.5% Initial Service Charge is very high.

Let’s compare the other common Service Charges….
When you go to a restaurant, the Service Charge can be 10% which lasts about 1 to 2 hours for a dinner.
When you repair your car, the mechanic charge you about 10% as labour charges for anything between 1 to 4 hours.
To see a doctor in a hospital, you need to pay for the consultation fees and the medicines are charged separately.
To engage a lawyer’s services, you need to pay the legal fees and other documentation charges.

Also note that you have to go the restaurant, mechanic, lawyer’s office or hospital at your own expense. They are not delivered to your door step and definitely NO Free Shuttle Service provided.

When you compare to financial services provided by a UTC, the service can be for a very long period. Usually, UTCs don’t charge separately for consultation services.
 
A common financial goal is Retirement planning.

For example, a 25 year old person wants to start his retirement planning. He plans to retire at age 60. A UTC will advise and conduct regular reviews on the investment for 35 years!
With only 5.5% as initial service charge, that’s equal to:
5.5%/35years = 0.157% per year!!!


Another common goal is Education planning.

A 3 year old boy will go to college at age 18. That’s 15 years for a UTC to advise and conduct regular reviews on the investment.
With only 5.5% as initial service charge, that’s equal to:
5.5%/15years = 0.367% per year!!!

Compare the many years of service versus a few hours for other services stated in the earlier paragraph.

 

Let’s see what UTCs qualifications are.

Many UTCs are professionals with Degrees in various fields. There are many engineers, teachers, accountants, IT Executives, etc. There are also UTCs who are dentists, doctors and lawyers. As per regulation, the minimum qualification is SPM with 3 credits.
  
Service Level Provided
Usually, the UTC will meet the investor at the investor’s office or house at the investor’s convenient time. The traveling time, transportation cost, petrol, toll and parking fees are absorbed by the UTC. There are many cases where the UTC have to pay for the meals if the appointment is conducted at a restaurant.

So in conclusion, for a Professional Unit Trust Consultant with a high qualification servicing an investor for many years, a 5.5% as service charge is very low.

Please also note that the 5.5% Initial Service Charge is charged by the UTMC, not by the UTC.  

Technically speaking, the investor did not pay any Service Fee to the UTC.

 

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