Know what you're paying for? A breakdown of investing fees

1. Platform fees

Platform fees can also be called administration fees. You'll have to pay platform fees if you use a linked investment service provider to access your investment plan. By giving you access to unit trust funds from a range of different asset managers, a linked investment service provider functions as an intermediary between you and your investment plans.

The amount and regularity of platform fee payments will vary from company to company, but using a linked investment service provider can be cheaper than trying to manage each of your investment plans on your own. Discovery Invest is an example of a linked investment service provider.

2. Asset management fees

Sometimes called fund manager fees, this fee is charged by the person who manages your unit trust funds. It could be a fixed fee or performance based, or even a combination of the two.

Asset management fees are usually charged as an annual percentage and they cover the costs of running your investment funds. These fees are typically payable on an ongoing basis, but there are exceptions.

3. Financial adviser fees

This is what you pay for your professional financial adviser's services. These fees could be charged on an upfront or ongoing basis, but financial advisers do sometimes charge their clients in different ways. They might charge a percentage of the value of the assets or an hourly rate for consultations. They could also just charge you for developing a financial plan that you then take home to implement yourself.

Don't be shy to speak to a financial adviser about their fee structure and how it works. Remember that they are qualified professionals with years of education and experience, and it may be valuable to have a trusted 'money coach' for life.

Ideally, your financial adviser should be someone who knows you, your family and your financial situation well, so you can turn to them at any time for advice on all kinds of financial decisions, like buying a new car, starting a new business or opening an offshore investment.

Comparing fees

When looking at costs, it is important to compare apples with apples. The Effective Annual Cost (EAC) is a measure that helps investors compare charges on most retail investment products, but it is only useful if you are comparing similar products.

Although the EAC is fairly standard, it is not legislated. It is possible that the EAC on similar products may differ because the calculations have been done differently.

 Don't lose sight of the future 

We might not like paying the fees associated with investing, but it's important to remember that your money is far better off in an investment than under your mattress. The returns you earn from investing will outweigh the fees you pay in the process.

You should be paying fair fees for the maintenance of your investments - after all, it's a valuable service that aims to ensure your future security and wealth. To learn more about how to keep your portfolio performing its best, click here.