TL;DR

Percentage fees feel small because they are designed to. A 1.5% annual fee on a R500,000 portfolio costs R7,500 every year. Three parties earn from your money, your adviser, your platform and your fund manager, and none of them adds it all up for you in rands. Percentage fees are easy to underestimate until you see what they look like in rands. National Treasury's 2013 technical discussion paper on retirement fund charges found that fee structures in South Africa tend toward complexity that most members never see in full. Source: Charges in South African Retirement Funds, National Treasury, 11 July 2013. ASISA introduced the EAC standard in 2016 to fix this. Ten years later most investors have still never seen theirs. The one question that changes everything: what did I pay last year, in rands?

The short answer nobody gave you upfront

A 1.5% annual investment fee on a R500,000 portfolio costs you R7,500 every year.

Not once. Every year. Whether your portfolio went up or down. Whether the advice was good or not. Whether you even looked at your statement.

That is not the number most people think about when they hear 1.5%. Which is exactly the point.

 Why does 1.5% feel harmless?

There is a reason the financial industry has always quoted fees as percentages rather than rands. Behavioural economics has a name for it: the abstraction layer. When a cost is expressed as a percentage it feels proportional, reasonable, even inevitable. When the same cost is expressed as a rand figure it feels like a decision.

1.5% feels fine. R7,500 a year on a R500,000 portfolio, every year, whether your portfolio went up or down, feels different.

Research into South African retirement savers found that only 37% of those with a retirement plan could give a definitive answer on what they are paying in fees, meaning 63% cannot name what their investment is actually costing them*. Not because the information does not exist. Because the system was not designed to make it easy to find.

The percentage is not the problem. The abstraction is.

Source: 10X Investments Retirement Reality Report 2023/2024, drawing on Brand Atlas survey data.

 Who benefits from keeping it abstract?

When a platform, adviser or fund manager charges a percentage of your portfolio, their earnings grow as your portfolio grows. A flat fee does not do this. A flat fee earns the same whether your portfolio is R50,000 or R5,000,000.

A percentage fee scales. The more your portfolio grows, the more the provider earns. That is simply how the model works. It also means the fee gets larger every year as your investments grow without anyone having to justify the increase.

This is not a conspiracy. But a percentage is easy to underestimate until you see what it looks like in rands. That is the moment it stops being a footnote and starts being something you can evaluate.

The three parties earning from your money and why none of them adds it up for you

Here is the part nobody says out loud.

When you invest in South Africa three parties typically earn something from your money. Your adviser earns a fee for recommending the product. Your platform earns a fee for holding and administering your account. Your fund manager earns a fee for managing the underlying investment. Each charges a percentage. Each percentage varies by provider and product. None of them are required to show you the combined total in rands.

In simple terms: multiple providers earn from your money but no one shows you the total in rands.

All three fees are expressed as percentages. All three compound against your portfolio every year. And in most cases you have never seen them added together in one place as a single rand figure.

In a 2013 technical discussion paper on retirement fund charges, National Treasury found that fee structures in South Africa tend toward complexity that most members never see in full.

Source: Charges in South African Retirement Funds, National Treasury, 11 July 2013.

 ASISA introduced the Effective Annual Cost standard in 2016 specifically to address this gap. Ten years later the information is technically available. It is practically invisible to anyone who has not been told exactly where to look and exactly what to do with it once they find it.

Why the system stays this way

Nothing here is hidden. It is just not shown clearly.

The percentage model persists because it works differently for the industry than a flat fee does. A percentage fee grows as your portfolio grows. A flat fee does not. Which means a flat-fee provider's main incentive is to keep you satisfied.

There is another layer worth understanding. Fee rebates, lump sum payments offered at the end of a long investment period, can make a high-fee product appear more competitive than it is. The lump sum looks like a win. But it does not cover the compounding growth that was lost while the higher fee was running.

In our experience, many people look at those numbers and assume the bigger figure means they are winning, without running the full calculation.

The reality is that many South Africans may ultimately pay significantly more than a flat fee over the term of a financial product without ever knowing it. This is not a knowledge failure. It is a disclosure failure. The system was not built to make this comparison easy to make.

The question that changes everything

Everything in this article leads to one question.

Ask it of every financial product you hold, every platform you use, every adviser you pay.

"What did I pay in fees last year, in rands, not as a percentage?"

If the answer comes easily in one number in one sentence, you have a provider worth keeping. If the answer requires effort, multiple documents or a calculation you have to do yourself, you have your answer about what transparency means to that provider. 

Clarity is the product. Everything else is marketing.

The design ends here

The percentage fee was not invented to deceive you. It exists because it works as a business model. But it only stays invisible if you never ask for the number in rands.

Once you do, the conversation changes. The fee stops being a footnote and starts being a decision. And decisions can be questioned, compared and changed.

You have been paying into investments your entire working life. You deserve to know what that has cost you, not as a percentage that floats somewhere in a disclosure document, but as a number, in rands, that you can hold in your hand and evaluate.

Ask the question.

Please note: Fynbos charges R100 per month as a platform fee on the Protea plan, reduced to R50 per month for investors under 30. A free Roots plan is also available. The platform fee does not include fund management fees, which are charged separately by the underlying fund. A flat fee may cost more than a percentage fee for very small portfolios.

Quick summary

What this is

Percentage fees are the default pricing model in South African financial services. They are charged by advisers, platforms and fund managers. They are expressed as percentages because percentages feel smaller than rands. They scale with your portfolio which means the provider earns more as your money grows.

Why it persists

A percentage fee grows as your portfolio grows. Fee rebates can make a high-fee product appear more competitive than it is without covering the lost compounding growth. National Treasury's 2013 research found that fee structures in South Africa tend toward complexity that most members never see in full. Source: Charges in South African Retirement Funds, National Treasury, 11 July 2013. The system was not built to make the real cost easy to find.

What to do next

Ask one question: what did I pay in fees last year, in rands? If you cannot get a clear answer in one sentence that is the answer. Read the next blog to see exactly what a 1.5% fee costs across different portfolio sizes and time horizons, in rands.

This article is for information purposes only and does not constitute financial advice. Fynbos Money is a licensed representative (FSP 51852).