Financial Adviser earns trailer fee of 1% annually

I met an agency manager from another company (not NTUC Income). His top adviser wants to leave him to join an independent financial adviser firm. The IFA firms pays him a trailer fee of 1% per annum on the total sum invested.

This means that the customer probably has to bear a charge of 2.5% to 3% on the amount invested. This is required to pay the trailer fee to the adviser and to pay the fund for managing the assets.

The total fee of 3% is FAR TOO HIGH.

Over the past 10 years, the average return on equity is about 7% per annum. After deducting 3%, the investor gets only 4% left. This is insufficient for the risk.

For a fund managed by NTUC Income, the total deduction is less than 1% per annum. If our fund earns 7%, the investor gets 6%.

A difference of 2% over 10 years amounts to more than 20%. You can get a much bigger payout from NTUC Income, because our deduction is modest. Most of the return goes back to you.

Over a long period, most funds will earn about the same return for the same type of risk. There is very little difference between the performance of good fund managers. It is better to invest in a large, well diversified, low charge fund (ie the fund offered by NTUC Income.