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Understanding Fees

With double-digit returns on all asset classes unlikely in the current economic environment, the portion of these restricted returns you are paying as fees becomes all the more significant.

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Understanding the exact nature and magnitude of the fees levied on your investments has always been critical in evaluating the value you derive from these products and the portion of your returns you are truly able to benefit from.

Over the years, the financial services industry has attracted much criticism with regards to the excessive levels and complicated structures of product fees. When added to the intrinsically complicated nature of the products themselves, it is understandable that some investors are left overwhelmed and frustrated.

However, like the cell phone industry, the investment industry has evolved over the last ten years. Why would someone keep an old Nokia 100 that is slow, ineffective and more expensive than the technologically cutting-edge iPhone 4? The same applies to financial products. Why would an investor stay invested in expensive, inflexible and complicated policy-based products when unit trust based products are available?

Overall performance

Financial products, like cell phones, have become smarter, easier to use and — more importantly — cheaper than their earlier versions. Unfortunately, many investors have not converted from their old financial products to the new models and are unable to capitalise on these valuable benefits. Ironically, these are often the investors who complain about the poor performance and fees charged within their financial products or portfolios.

It is important to understand that investment performance and investment fees are inextricably linked. Your effective return is based on the returns of the underlying unit trusts selected to construct your financial product. However, this return is diminished by the total ongoing costs you are paying to be invested in these funds.

So, when your portfolio delivers a lower return, your fees effectively account for a larger chunk. For example, if your portfolio delivers a 30% return and your total ongoing fee is 2% per annum, this accounts for a relatively small percentage (6,7% of your total return). On the flipside, if your return is only 10% then these fees make up 20% of your total return.

The fees

You are charged two types of fees on investment products: initial fees that are deducted from your gross investment amount and paid before your money is invested, and ongoing fees that are normally deducted monthly from your invested assets. Ongoing fees are percentage-based, meaning the higher the asset value of the investment, the higher the fee in rand terms.

These fees can either be paid upfront or on an as-and-when basis. Non-negotiable upfront fees were common in the older generation, policy-based products. However, one of the problems with this method is that punitive penalties are levied should you wish to amend your contributions or terminate your contract before the end of the contracted term. Legislation now states that no more than 50% of advice fees may be paid upfront.

Fees paid on an as-and-when basis are used by almost all unit trust based product providers, where fees are only payable when each payment is made, like a ’pay-as-you-go‘ cell phone. This method is in the best interest of you, the product provider and the intermediary. As intermediaries are not paid upfront, there are no penalties levied if you stop or reduce your contributions or transfer your investment to another product provider.

Where your fees go

There are three parties that can earn fees when you invest in a financial product: intermediaries, administrators and asset managers. Negotiable initial and ongoing fees are paid to your intermediary for guiding you in selecting the most appropriate product to achieve your financial goal. Initial fees can range from 0% to 3%, while ongoing fees are normally negotiable from 0% to 1% per annum and can be changed at any stage.

A fee is also paid to the administrator or product provider for delivering a range of services to the investor. Some administrators charge an initial fee that is calculated using a sliding scale, so the more you invest, the lower your initial fee. However, all administrators levy an ongoing administration fee.

A further fee is paid to the asset managers of the funds selected to invest the portfolio in. Most funds do not charge initial asset management fees and those that do normally charge 0,25%. Ongoing asset management fees vary from one fund to another.

Whether you are shopping around for a new cell phone or looking to invest your hard-earned money, understanding who and exactly what you are paying for — while not your only consideration — should play a big role in your ultimate decision.

Nico Coetzee holds the position of executive: business development at PPS Investments. Having cultivated sophisticated broker and fund management networks during almost a decade of industry experience, he manages PPS Investments’ Retail Product Forum and serves as a member of the company’s Investment Policy Committee.

Investing

(Infographic) The 10 Things You Should Cover In Every Investment Pitch

If you want to wow potential investors, you need to cover your bases.

Matthew McCreary

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If you’ve ever watched Entrepreneur’s original series, Elevator Pitch, then you’ve probably seen smart founders make dumb mistakes while pitching their ideas to potential investors. They might flub an answer or get tongue-tied, or they might just be a little boring. Other times, you might notice that something seemed off about a pitch, but you can’t quite put your finger on why.

Investors are gambling every time they put money into a new project or idea. Your job when pitching is to prove to them that you’re worth the risk. That means you’ll need to not only show them the possible upside of what they have to gain, but also be clear about what they could possibly expect to lose and their odds. In other words, you need to give them a holistic view of what you do, not just the one good idea.

You might have pitched an investor yourself and thought you crushed it, only to hear that the investor isn’t interested. If that’s the case, there’s a chance the pitch was missing one of 10 essential elements.

This infographic by Buffalo 7 breaks down 10 slides you should have in your next investment pitch deck. If you’re not presenting formally, though, you can still keep track of these aspects in your head and make sure you cover each one. They include:

  1. The vision, where you concisely explain your idea.
  2. The problem. Why is your vision necessary or helpful?
  3. The opportunity. What is the market size, and how can you position yourself to earn a share of it?

Related: How To Pitch Your Business, Product Or Idea To Industry Experts

This is just the start, though. Check out the infographic below to see the rest of the slides you need when pitching investors.

1541174287_investment-pitch-infographic

This article was originally posted here on Entrepreneur.com.

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‘Shark Tank’ Investors Reveal Top 5 Tips To Make Your Business Famous

Is your business worthy of fame? If so, pay attention to what the Sharks have to say …

Eric 'ERock' Christopher

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Shark Tank

Shark Tank enters its tenth season as popular as ever. Over the past decade, millions of people have watched fascinated as entrepreneurs pitched their business ideas and startups in the hopes of winning an investment and support from self-made millionaires and billionaires.

The multi-Emmy® Award-winning reality-based show has had a tremendous impact on the business world and has been a major influence on the increased popularity of becoming an entrepreneur. Over the years, the show has evolved into one of the world’s top platforms to launch a business and recently reached an astonishing $100 million in deals offered in the Tank.

I was recently invited to attend a private event hosted on the set of Shark Tank to celebrate their 10th season and met with all the Sharks and most of the guest Sharks for the current season. This year’s guest list includes luminaries:

  • Charles Barkley, Hall of Fame NBA star and TV analyst
  • Alex Rodriguez, legendary baseball player and businessman
  • Rohan Oza, an iconic brand builder and marketing expert
  • Sara Blakely, founder and owner of SPANX brand
  • Matt Higgins, the co-founder and CEO of RSE Ventures and vice chairman of the Miami Dolphins
  • Bethenny Frankel, TV celebrity, author, and founder of Skinnygirl brand
  • Jamie Siminoff, the CEO of RING, who rejected an investment offer in season 5, but went on to sell his company to Amazon for a whopping $1 billion.

My better half was also invited, and we arrived promptly on time at Studio 24 inside of Sony Pictures Studios in Culver City, CA. We were greeted by the cordial staff who informed us that the Sharks were still filming the last takes of the day. After several minutes, we were invited to chat with the Sharks on the main floor where nervous entrepreneurs excitedly pitch their companies to the investors under the bright lights of the studio set.

I was curious to know what excited the Sharks the most about their tenth season and what they believed to be the best advice for an entrepreneur to help make their business famous.

1. Create an ingenious product

When asked, Lori Greiner said, “It’s a mix, right? Of smart marketing and ingenious product. For example, Scrub Daddy was a technology. So, taking that one sponge, which was revolutionary, changed the whole sponge arena. We now have, to date, 20 different SKUs, and we have 30,000 new retail locations and 170 million in sales. That’s what takes it from one idea to a global brand.”

Of course, skillfully promoting your product on a platform like QVC is another excellent way to make your business famous. The day after the Scrub Daddy episode aired, Greiner helped CEO Aaron Krause sell their entire inventory of 42,000 sponges in less than seven minutes on QVC.

Related: 6 Great Tips For A Successful Shark Tank Pitch

2. Leverage social media marketing

barbara-corcoran

During my chat with Bethenny Frankel, she stressed, “Social networking is so important. Also being a little bit disruptive now … and you have to be creative. You have to be creative. The President was the most disruptive candidate that there’s probably ever been in history. He got people’s attention, and young entrepreneurs need to get people’s attention in some way. So be a little disruptive.”

Matt Higgins responded, “I’d say that you have to understand social and digital marketing. You can’t survive unless you understand Instagram, Snapchat or all the tools out there. You have to be contemporary.”

Barbara Corcoran claimed, “Every one of us successful entrepreneurs, for the last two years, were phenomenal at social media. It’s true. No exceptions.”

No smart entrepreneur will deny the power of social media when it comes to making your company famous. With more than 2 billion people worldwide using some form of social media, any business can put their business in front of a large audience, especially if they can create content that goes viral.

3. Build a community

Daymond John stressed the value of building a community. “You’ve got to build a community,” stated John. “Nobody needs to buy anything new in this world. They only buy it because there’s some form of community and/or need that you are supplying for them.”

John speaks from experience. He built a successful clothing empire by creating a vast community of his own via his clothing brand FUBU. John wisely invested in celebrity endorsements, making him an early pioneer of modern influencer marketing.

If you lack the resources to build your own community from scratch, you can leverage the power of others. Partnering with influencers who have cultivated their own communities allows you to introduce your product or service to larger audiences. In fact, some consider Shark Tank to be the world’s largest business influencer platform.

4. Devise a publicity hook to win earned media coverage

Barbara Corcoran also said, “I’d say you need a publicity hook. Some hook, angle or gimmick that grabs the attention unfairly from your competitors.”

Remember, Shark Tank is a unique combination of reality television, business acumen, and entertainment. Doing something unique, different, or disruptive can get you significant media attention and abundant free publicity… especially if you’re able to leverage that publicity and captivate the show’s producers, who decide your fate as to whether you’ll appear on the show.

Regardless if you want to appear on Shark Tank or not, being featured in the media is a way to differentiate your business from the competition and reach a broader audience. Be creative and willing to take educated risks when it comes to getting noticed by the media. You should always be actively building relationships with media representatives and ask for their insights when formulating your plan.

Related: Shark Tank Funded Start-up Native Decor’s Founder on Investment, Mentorship And Dreaming Big

5. Know your strengths and stay focused

When I asked for billionaire Mark Cuban’s insights, he thoughtfully replied, “Knowing your unique advantages, play to that, and your strengths. And focus. You know, what happens is very often people start with an idea, get a little bit of traction, then it gets hard. And when it gets hard, they start looking for other things to do as opposed to playing to their strengths. Because businesses aren’t supposed to be easy. You know, if they were easy everybody would already be rich, and we’d all be sitting on a beach somewhere. And so, when it gets tough, you gotta dig in and work hard. I’d say the final thing I’d add is that sales cures all. There’s never been a business that succeeded without sales. So, if you focus on selling … if you’re able to sell … and that’s something that is one of your core competencies, then you’ll be okay.”

These are wise words from one of the world’s few billionaires.

This article was originally posted here on Entrepreneur.com.

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The Best Way To Get Your Teenager To Start Investing Right Now

Jeff Rose advises a young fan on where to start his investment journey.

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In this video, Entrepreneur Network partner Jeff Rose talks about receiving a letter from a young investor, who is looking for advice on how to begin investing.

Rose talks about the act of actually doing the investing versus worrying about reading books or asking others about the process. Taking action gets the most results, since you are able to make mistakes and start the learning process. Taking action also leads to more experience, which is to say if you begin investing as a teen, you will be much more savvy about investing as a twenty-something.

In answering this young investor’s concern about investment direction – the fan hopes to balance short-term gain and long-term gain, as well as to establish some padding for a future business – Rose turns him in one specific direction: A Roth IRA. When he was younger, Rose didn’t even know what a stock was until far into his college years; during this time, he discovered the Roth IRA and learned of its compounding power, as well as the accessibility of an initial investment.

As another route, Rose also mentions starting a business. This path, Rose explains, will help you achieve the most return on investment.

Related: Making International Investing Simple And Transparent – CybiWealth Digital Platform

Click on the video to hear more tips for a younger investor.

This article was originally posted here on Entrepreneur.com.

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