How do you calculate the total cost of your investments?

You probably know what your adviser charges, right? But do you actually know what your investments cost altogether? The truth is, the advice fee is typically just one piece of the puzzle.

Other costs sit hidden inside the funds, on the investment platform, or in entirely separate agreements. Understanding the full amount starts with a very simple method. Find each charge, identify exactly what it pays for, and count it once.

Let's separate these layers to see how this build our understanding. First, there's the cost of the underlying investments themselves. Second, there might be a platform fee for administering your account.

Third, there's the agreed charge for advice in planning. And fourth, there could be initial fees, performance fees, currency conversion costs, or even exit charges. Now, not every arrangement has every single cost, but asking who receives each charge and how it's calculated is the crucial first step.

To do this accurately, you'll usually need more than one document. Check your current, fund factsheets for the actual share classes you hold. Look over the platform fee schedule and your statements.

Read your signed advice agreement and any separate invoices. And if you're looking at a proposed investment, make sure to obtain the personalised cost disclosure and product terms. Put these documents side by side, keeping their dates visible.

You know, a percentage from an old factsheet might not actually describe your current arrangement. When looking at a South African fund factsheet, you're often hit with a bit of an alphabet soup. Let's clear that up right now.

The first abbreviation you'll see is TER, or total expense ratio. This simply describes the expenses that sit inside the fund itself. You can think of it as the foundational cost of holding the fund.

Then we have TC or transaction costs. transaction costs describe the actual expenses of buying and selling the fund’s underlying investments. Finally, there's TIC or total investment charges. This is the combined measure of the total expense ratio plus the transaction costs.

So, for example, a total expense ratio of 0.9% plus transaction costs of 0.1% gives you total investment charges of 1%. Just remember, these are disclosure measures, not guarantees or promises about future costs. Let's shift from abstract percentages to concrete currency.

To really grasp the impact of these fees, we need to put a year into rand terms. We'll use a hypothetical portfolio of 3 million rand, held at an unchanged value, just for the sake of this calculation. We'll assume separate annual charges, including VAT where applicable.

Now keep in mind, this is just an estimate to explain the layers. It's not a quotation, a market benchmark, or a formal calculation. Actual amounts will always depend on changing values, transactions, dates, and of course, your specific agreement.

At 3 million rand, a fund total expense ratio of 0.9% plus transaction costs of 0.1% represent 30,000 rand a year, or 1%. Next, we add the genuinely separate layers. Platform administration at 0.35% represents 10,500 rand.

Ongoing advice at 0.6% represents 18,000 rand. So the illustrated annual total is 58,500 rand, or 1.95%. Notice here that the adviser receives the advice component, not this entire amount.

A major mistake involves treating the total investment charges or TIC as a separate fee rather than a container. If you use the 1% combined TIC figure, do not add the 0.9% TER again. You can show the two components, or their combined total, but you must not count both versions in the same bill.

The aim here is a complete bill, not just the largest possible number. Here's another trap to avoid. If you hold several funds, their weights matter.

Let's say 60% is in a fund with total investment charges of 1.2%, and 40% is in a fund charging 0.7%. The weighted fund cost is 1%, not the simple average of the two rates. Always use the correct share classes and definitely check the result when your allocations change.

We've looked at a single year, but why does hunting down these small percentage points fundamentally matter over decades. Small recurring differences can compound massively. Consider 1 million rand growing for 20 years, with no money paid in or taken out.

At a constant net return of 7% a year, it becomes about 3.87 million rand. But at 6%, which is just a 1% point difference, it becomes about 3.21 million rand. So, the crucial takeaway is the staggering difference.

Roughly 663,000 rand. Now, this arithmetic isolates a 1 percentage point difference in net return. Real outcomes, of course, also depend on markets, tax, and risk. before you go rushing to change your portfolio, remember this, a low price does not by itself establish good value, and a high price does not establish quality.

Two investments with different risks simply aren't interchangeable, just because one costs less. The really useful question to ask is whether the full cost makes sense for the work and investments you actually receive. Here's a practical checklist for your next review.

Ask your provider to show your full first year and recurring costs in rand. Have them identify exactly who receives each charge, which amounts overlap, and whether VAT is included. Also ask for the ASISA EAC, or effective annual cost disclosure.

Now, the EAC is another view of the costs over specified holding periods, not an extra charge to add to your total. Ask them to explain the calculation basis, any caps, and the actual work covered. And importantly, ask them to show separately what changing the arrangement would cost.

You're basically asking for a clear, reconciled explanation that connects the documents to the money and the service. Does your total investment cost make sense for the work and value you actually receive? If you'd like an independent written view of your arrangements to help you figure that out, explore ClearGauge's Financial Clarity Review.

The scope and fee are agreed before work begins and you can absolutely keep your existing adviser. It's all about giving you the tools to truly understand your portfolio. ClearGauge wealth.

Advice before action.