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Pricing: Is the Annual Fee really only 0.5% per year?

Simplewealth charges an annual management fee of 0.5% (on the value of your account) per year.

Another way to think of this is:

  • CHF 5 per year for every CHF 1’000 invested; or

  • CHF 50 per year for every CHF 10’000 invested.

This fee covers all of the costs incurred by Simplewealth in respect of managing your Simplewealth Account.

The annual fee is charged monthly (0.5%/12 months) on your account balance at the end of the month.

How cheap it that?

Are there additional costs?

All of the costs incurred by Simplewealth in managing your Simplewealth Account are paid for by Simplewealth out of your management fee.

This means you have:

(a) NO additional trading costs: There are no additional costs when we buy or sell investments of your behalf.

(b) NO additional transfer costs: There are no additional costs when you deposit funds into your Account or when you withdrawal money from your account.

(c) NO additional administration costs: For example, there are no additional costs for you to open or close your account.

Moreover, there are no additional performance fees. If your investments do well, you keep all of the gains!

How does the Simplewealth 0.5% fee compare to investing in a mutual fund offered by my bank?

It is difficult to know for sure what the exact fees and costs are in a fund that your bank maybe trying to sell to you.

Research by Forbes Magazine in 2011 found that potential costs for funds in the USA could include the expense ratio, transaction costs, cash drag and a tax cost and result in total costs of 3.17% to 4.17%!

A 2019 article by Redesigning Financial Services using data from Morningstar InvestmentNews and Visual Capitalist shows that the total costs include an expense ratio (0.59% avg), transaction costs (0.75% avg), cash drag (0.26% avg) and advisory fees (1.00% avg) giving a total average cost of 2.60%.

Why is the Simplewealth price so low?

The simple answer is - we want you to keep more of your money!

The more money that is in your account, the greater your potential returns.

We are 100% online, and so we don’t need to charge you high fees to pay for expensive office space or commissions to sales people.

What is the benefit of low fees?

A very basic example:

  • Assume that you earn a 5.5% gross return with us. After fees, you have a net 5% return.

  • If you are with another manager who charges a 2% fee (eg including the management fee, trading fees, transfer fees, administration fees, and other “hidden costs”) then after fees, your 5.5% gross return is a net 3.5% return.

  • So, if we assume the same 5.5% gross return for 5 years, then you would have saved 1.5% per year for 5 years! With an account balance of CHF 50,000 that difference is a saving in fees of CHF 750 per year, or CHF 3,750 over the five years. Would you rather that money be in your pocket or your wealth manager’s pocket?

What about the underlying ETFs?

The ETFs (Exchange Traded Funds) that we invest in do charge an additional fee. This is because the ETFs are a fund that buys underlying securities (of shares in companies and bonds issued by companies). Those funds are also listed on stock markets. Accordingly, those funds have operating costs, including trading costs to buy and sell securities.

The costs incurred by an ETF are usually referred to by a Total Expense Ratio (or TER). These can vary from 0% to over 1%.

The ETFs that Simplewealth invests in tend to have a TER of 0.1% to 0.3%.

Accordingly, the total investment costs that you incur will be the total of the Simplewealth Management Fee plus the TER of the ETF. This means that the total investment cost that you will incur for investing in a portfolio of ETFs via Simplewealth should be between 0.5% and 0.8%.

If are you investing in a fund, for example, through your bank, they may state that they have a management fee of 1%, but you should check what the TER of that fund is for a true comparison.

What about Swiss Stamp Tax?

If you are a Simplewealth client resident in Switzerland then you are liable to pay Swiss Stamp Tax (also known as Swiss Stamp Duty) on BUY/SELL transactions in your Account. We do not cover this because it is a tax obligation that falls on you as the owner of the investments.

Depending on the security purchased or sold, it may be 0.15% or 0.075% of the BUY/SELL transaction amount, or it may be omitted.

We deduct any Swiss Stamp Tax from your Account and pay it to the Swiss Tax Authority on your behalf.

We provide an annual summary of the Swiss Stamp Tax incurred in your Account so that you can include it in your Annual Swiss Tax Return.

Because we believe in investing for the long term, we do not engage in active daily trading which incurs additional Stamp Tax for you.

Moreover, we will never engage in “churning” which is the buying and selling of securities to generate trading fees. Because we pay the trading fees from our management fees we also have an interest in keeping trading to a minimum – thus ensuring the lowest Stamp Tax possible.

We only trade when we need to rebalance your Account – which is always in accordance with your investment objectives, investment strategy and investment time horizon.

Simplewealth. Your investment. Your future.