143) Service Charge and Other Considerations in Unit Trust Investment.
There are Unit Trust Management Companies that provide Free or ZERO initial service charge.
It is an interesting idea when you do not have to pay any charges to start a Unit Trust investment.
Take note of the Free vs Paid Charges.
Most companies charge a few percentage for the initial service charge. Depending on the fund types, it can be up to 7%.
Do ask the questions below to know better before you start to invest.
- What is the minimum amount to start?
- What is the minimum amount for add on (top up) investments?
- What is the initial Service charge amount?
- What is the yearly management fee rate?
- What is the yearly Trustee fee rate?
- What is the fee rate charged when you sell the units (redemption fee)?
- Is there any minimum investment period?
- Is there any penalty if withdraw before the minimum period?
- What are the switching fees?
- Any special charges if switch within a certain period?
Let's do a case study on different charges effect on the investment.
Fund A :
Initial Service Charge = 5% of NAV
Yearly Management Fee = 1% of NAV
Fund B:
Initial Service Charge = 0% of NAV
Yearly Management Fee = 2% of NAV
Which fund charges higher if you invest for 10 years? Fund A or Fund B?
Assume both funds gave 10% yearly return.
However, Fund B starts to have lesser value due to higher charges from the Year 5 onwards.
A fund that does not charge initial service charge, but charge a higher yearly management fee will affect the fund value in the longer term. Your payment for the initial 5% is only a 1 time charge. However, a higher yearly Management fee affects every year.
Other Considerations
There are also other fund non-performance related considerations.
You may want to consider below points as well:
- Facility to switch to other funds
- What funds choices available
- Which funds regions are available
- Special incentive for high amount investment, like Gold or Ordinary membership
- Free insurance
- Optional group insurance
- Estate planning services - Will, Wasiat and Trust Nominations.
- Online transactions
- Redemption waiting period
- Branches locations
- Time the Consultant is available - office hour or flexible time
- Meeting places where available - office or off-site
Before you decide on which fund to invest, ask more questions about what you would like to have.
Do also consider if you feel comfortable with the service level of the Consultant.
Does the Consultant take time to understand your financial requirements.
Does the Consultant provide a few possible solutions to you.
Do consult your Unit Trust Consultants on the details.
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