This week I decided to take the plunge and try assess the performance of my Allan Gray Retirement Annuity (RA) vs that of a competitor product. (https://www.wealthwoke.com/is-my-allan-gray-ra-still-all-that/)
I did this partly to see if I was getting good value from my current provider. There was another reason too though. As your self-appointed emissary on all things financial, purpose and lifestyle related, I also thought it would be a good idea to check out how easy it is to actually do this exercise.
Short answer: It’s not.
If someone with three finance degrees and 20 years of experience working in asset consulting as well as financial journalism/PR finds it extremely complicated and time consuming, what hope do regular folks have of making any sense of it?
Even the RA providers I was engaging with on this process were left scratching their heads over certain points.
Rather than try to scare you off the process, I thought it would be useful to share some tips based on my experience.
- Make sure you are comparing apples with apples
The toughest part of the comparison was making sure I was comparing the providers on a like for like basis. These are some of things to look out for:
- Make sure the historial returns of the funds are assessed on an equivalent basis i.e. they should all be either before or after fees. They should all be measured over exactly the same time period.
- When comparing fees, make sure that all fees are included. These include administration/platform fees, portfolio fees (which should include transaction costs) and advisor fees. Also make sure that the fees are compared either all including or all excluding VAT.
Also take into account whether funds have performance clauses in their fee structures or whether the fees reduce as the size of your assets gets bigger. These could have a significant impact on the current and future fees being charged.
- Don’t just rely on the quotes or statements you are provided with.
Financial services companies are masters at providing information that highlights their strengths and hides their weaknesses. Go online and download the fund factsheets. Read blogs and articles about the providers. I was really surprised by some of the information that came to light through my own research.
- Raise questions or concerns with the providers
If you don’t understand something or the numbers aren’t adding up, don’t be afraid to ask for clarity from the providers. You are not stupid – this is hard and made even harder by the variances in the way providers present their products.
- Use tables
Comparison tables make it much easier to compare the various elements of the quotes. Use them.
- Don’t give up during the process – it’s totally worth it
There were a couple of occasions where I almost threw in the towel. I also questioned whether I shouldn’t rather blog about fashion or lip gloss (this does seem to be what the internet wants – sigh). However, I stuck with it and in the end, felt super empowered that I was taking control of my finances. You can do the same.