The ASISA Board approved the implementation of the ASISA Standard on Effective Annual Cost (EAC) in August 2015.
The EAC comprises four separate components into which various charges are allocated.
Investment Management Charge
The investment management component includes all costs and charges for all underlying investments, as set out in the “ASISA Standard: Calculation and Disclosure of Total Expense Ratios and Transaction Costs”. In the absence of a TER or Transaction Costs, an equivalent charge calculated according to the principles in the “ASISA Standard: Calculation and Disclosure of Total Expense Ratios and Transaction Costs” should be utilised.
All charges that an investor incurs for the provision of financial planning by an adviser or representative (as defined in FAIS) are included in the Advice component. Where the adviser charge is not facilitated by the provider, or the investor has not engaged the services of an adviser, the Advice Charge must be reflected as 0.0%. In such a case, a footnote must be included explaining that as no advice fee has been supplied none could be included in the calculation.
The administration charge component includes all charges that an investor incurs relating to the administration of a Financial Product. Termination charges, exit penalties, loyalty bonuses or any similar structure are excluded from the administration charge calculation.
The “Other” calculation is only shown if not a zero value and should include all termination charges, penalties or loyalty bonus payments that are reasonably foreseen if the investor terminates his or her contract and withdraws all of the funds at the end of the disclosure period. In essence it is the “catch all” to contain any remaining charges that will be levied against a Financial Product.
The effective date is 1 June 2016, with ASISA members required to complete the first phase implementation by 1 October 2016.