Entry fee
Pays for:
The expenses of setting up records. It could also be income for the provider and/or a fee for the introducer. The entry fee is usually deducted from your investment before it is invested, or deducted from your first investment return.
Also known as:
Placement fee, arrangement fee, application fee, set-up fee, establishment fee, initial charge, service fee.
Cost:
Up to 6% of your initial investment - it's rarely nil.
Tips:
- An entry fee often indicates that the adviser who sold the product to you is being paid a commission. Find out what proportion they receive of the entry fee.
- It's better not to have an entry fee or to have a 'low entry' fee. Otherwise you will only make a return once the returns exceed the entry fee you've paid.
- Find out if your initial investment is treated differently from the money you put in later. It may be 'locked in' until you reach a certain age, or you may have to pay a special exit fee to withdraw that initial investment. If the initial investment has a special name such as 'foundation units', 'foundation account' or 'initial units', this may indicate it is treated differently (such as with a lower credited return). A less restricted product is more desirable because it offers you more choices in the future.
A company such as a bank, finance or insurance company that creates and provides insurance, mortgage, banking, savings or investment products.
A way to use your money to make it grow.
A person who sells financial advice and/or products. They include financial advisers, insurance agents, planners, sharebrokers, mortgage brokers and bank managers or agents. They may be salaried, paid a commission or have an hourly rate.
The money paid to a broker, financial adviser or planner, who sell products on behalf of a company. Commission can be based on the number and/or the value of the investments they sell.
Being unable to remove your money from an investment or savings scheme without paying some kind of penalty. Usually an investment is locked in for a certain period - a number of years, months or until an event, like your retirement. For example if you make a six month fixed interest investment at the bank, your money is locked in for six months.
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