An analysis of EasyEquities’ new R25 monthly fee shows that it can have a devastating effect on those with little money, while it has nearly no impact on rich users’ assets.
EasyEquities’ decision to make its Thrive loyalty programme mandatory and charge users who do not achieve level 3 a R25 per month fee drew sharp criticism.
Well-known investor Karin Richards described EasyEquities’ new R25 per month Thrive fee as disingenuous. “I would hate to be treated like a child in this manner,” she said.
“The EasyEquities spin is breathtaking in its audacity. ‘It’s not a fee, it’s a favour’ – that just blows me away,” she said.
Many people argue that it is essentially a platform fee masqueraded as a loyalty programme that costs R25 per month.
Richards and others advised EasyEquities to stop mincing its words and announce that it will start charging a platform fee to bolster revenue.
Koshiek Karan argued the message, “It now costs R25 per month to use your service”, is far more palatable than “Be a good boy, get a certificate, and save money”.
Another criticism is that the new R25 monthly flat fee disproportionately hurts smaller investors and poorer South Africans.
Daily Investor previously showed that the 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.
This is why most investment platforms and asset managers charge a percentage fee instead of a set amount per month.
SatrixNOW, for example, has an ongoing annual fee of 0.5% on the total investment amount to use the platform.
A percentage fee is used to avoid severe value destruction among smaller investors and spread the load more evenly.
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 charged R25 per month.
With a 0.5% fee, a person with R1,000 will only pay 42 cents 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 from small investors.
Put another way, the R25 monthly Thrive fee will only become cheaper than the SatrixNOW 0.5% platform fee for users with investment accounts greater than R60,000.
The table below shows why the EasyEquities R25 per month Thrive fee is seen as regressive, hurting poor South Africans more than their richer counterparts.
|Investment amount||Equivalent annual platform fee|