How an investment platform enhances financial access

Benefiting from an investment platform

Many people start their savings journey by using banking products and, whilst this is a good place to start, banking products typically offer a lower risk and return profile which can quickly become unsuitable for investors’ needs. Banking products can also introduce risks such as not keeping up with inflation and reducing savings in real terms, which is where the benefits of investment platforms come to the fore.

Younger investors, whose investment time horizons are usually longer, need to start taking on equity exposure early in their investment journey. According to a Nataxis Global Survey of Finance Professionals done in 2022, investing too conservatively is one of the top five biggest mistakes that prevent people from retiring comfortably.

Investment platforms typically offer conservative solutions similar to those offered by banks, but they also allow investors access to higher equity exposure funds, which are shown to offer investors better returns over time.

What to consider when moving from a banking product to an investment platform

When investors start their financial advice journey, and start to move from banking products to those offered by investment platforms, there are usually two key hurdles which can impede their access to investing, namely:

• high minimum contribution amounts required by many investment platforms, and
• high administration charges on smaller investment amounts.

Once investors have identified platforms with minimum investment amounts they can afford, fees become an important factor, as even a small change in fees can have a material impact on investment returns over time.

PSG Wealth’s minimum monthly contribution amount to investment products is a very competitive R500, and our maximum administration fee is 0.50%, which can be further reduced when using the services of one of our financial advisers or investing in our award-winning funds of funds.

We also provide the benefit of family pricing, which allows all family assets to be grouped together to determine the administration fees. This benefits all members within a family group, and is especially advantageous for family members with smaller investment amounts.

The PSG Wealth Platform offers an array of solutions to cater to a variety of investor needs, no matter what stage of their journey they are at. This includes a cash account investment option, which is an alternative to a typical banking product and provides:

• easy access to funds (unlike fixed-term deposits from banks),
• quicker turnaround times when moving funds into higher equity exposure instruments,
• higher interest rates for extended periods resulting from exposure to longer-duration instruments (which is important in the current interest rate environment where rates are likely to drop this year), and
• a low platform administration fee of 0.10% (including VAT) and reduced fund management charges to provide investors with an attractive net return.

The key features of this product are shown in the table below

Platform administration fees (incl. VAT)	Funds available in the cash account	Fund management fees (incl. VAT)*	Sources of money that may be invested in the cash account
0.10%	PSG Wealth Enhanced Interest Fund of Funds	0.380%	All non-unit trust investments
	PSG Money Market Fund	0.173%
	PSG Income Fund	0.460%

 

* The PSG Wealth Enhanced Interest Fund of Funds’ fund management fee is 8 basis points (bps) p.a. less than on any other platform and the PSG Money Market Fund is 12.5 bps p.a. cheaper than on any other platform

Comparing yields: One-year rolling returns

Money market funds generally publish daily ‘annual effective yields’. Keep in mind that these are based on recent daily accruals that are annualised. These published yields thus provide a short-term view of the funds' returns. It is generally more useful to consider one-year rolling returns over extended periods to determine consistent relative performance.

Sources: PSG, FactSet. Data as of 31 January 2024.

Conclusion

In addressing South Africa’s challenges, investment platforms offer enhanced financial access and can be effectively leveraged to accelerate economic upliftment.

Traditional banking products have many limitations, especially for younger investors, and low-risk investment products offered by investment platforms are a suitable alternative with additional benefits. Contact a financial adviser today to help guide you on your path to financial security and prosperity.