EasyEquities’ R25 monthly fee can destroy investment returns

EasyEquities’ new R25 per month fee could change the return on a R5,000 investment over 10 years from a R3,971 profit to a R226 loss.

EasyEquities has surprised users by making its Thrive loyalty program mandatory and charging users who do not achieve level 3 a R25 per month fee.

If a user’s account does not have free cash greater than R25 to pay for the Thrive Fee, EasyEquities said it ‘may sell some or all your investments to pay the fee’.

Many EasyEquities clients slated the mandatory subscription and R25 charge, saying it is nothing more than an additional cost to investors.

EasyEquities has always promoted the platform as an affordable way to invest, with no minimums and no monthly account fees. This has now changed.

Of particular concern is that the R25 flat fee disproportionately hurts smaller investors who do not have much money in their accounts.

For example, a person with only R1,000 in their investment account will lose around 30% of their money in a year with a R25 per month fee.

A person with R1 million in their account will lose only 0.03% of their value when they are charged R25 per month.

To avoid hurting small investors, most asset management companies and investment platforms charge a flat fee.

SatrixNOW, for example, has an ongoing annual fee of 0.5% on the total investment amount to use the platform.

With a 0.5% fee, a person with R1,000 will only pay 42c per month. The person with R1 million will pay R417 per month.

It is a more progressive system which does not take a disproportionate amount of money for small investors.

DailyInvestor asked EasyEquities for feedback about its new R25 per month Thrive fee, but the company did not provide feedback by the time of publication.

Monthly fee can crush investment returns

Although R25 per month may not sound like much, it can have a tremendously detrimental effect on small investments over the long term.

To illustrate the effect of a R25 monthly fee, Daily Investor compared two hypothetical R5,000 investments over ten years.

The first investor used the previous EasyEquities service with no fees. The second investor is on the new system EasyEquities service with a mandatory Thrive subscription.

This investment comparison simulates a buy-and-hold strategy over ten years with no additional investments. This strategy would trigger the R25 fee every month.

We used the popular Satrix JSE Top 40 as an investment for the ten years – from 2013 to 2023.

The investment on the original EasyEquities platform without fees would have grown to R8,971.25 – a 79% total return.

The investment with the new Thrive membership would have decreased to R4,774.07 – a 4.5% loss over the ten-year investment period.

The charts below show the growth of the Satrix JSE Top 40 investment on the old EasyEquities platform and the new Thrive model with a R25 monthly fee.