INVEST. GROW.THRIVE.
Some financial advisors charge an upfront fee when you become their client. Even if the amount looks small,it's worth thinking carefully about the long-term impact before you pay it. For example, a 3% upfront fee might sound small, but over time it can take a noticeable bite out of your wealth. Let's look at a clear, simple example using a R 100 investment that earns 10% per year for 5 years.
1. Scenario 1: Investment with NO upfront fee : You invest R 100 and earn 10%compound growth each year. After 5 years your money grows to R 161.05, givingyou a total profit = R 61.05 (a 61% return on your original R 100).
2. Scenario 2: Investment with a 3% upfront fee : Your advisor takes 3% right atthe start, so now only R 97 is invested (R 100 – R 3 fee). That R 97 also growsat 10% per year for 5 years to R 156.22 giving you a total profit = R 56.22.
What the numbers really mean in plain language
The 3% upfront fee reduced yourfinal amount by about R 4.83, more than the original R 3 upfront fee youpaid. This is because the R 3 was never allowed to grow at 10% over the 5 years. In percentage terms, the R 3 upfrontfee lowered your total return by about 5 percent over the 5 years.
The simple takeaway : The longer the investment runs or the higher the return, thebigger the upfront fee cost becomes. That’s why we advise a no upfront-feeoptions. Small fees compound too — just in the wrong direction.
