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) on account balances of CHF 48’000 or more.

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

For account balances under CHF 48’000 your managment fee will be CHF 20 a month.
This fee covers all of the costs incurred by Simplewealth in respect of managing your Simplewealth Account.

How cheap it that?

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%.
⠀⠀⠀A 2019 news report by The Financial Times reported that the Mifid II regulatory disclosures showed that some absolute returns funds incurred transaction costs almost equal to headline charges. They give the example of one fund that have a management fee of 0.85% and then transaction costs of 1.03% giving a total cost of investing of 1.88%.

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 deducting a 0.5% fee, 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 CHF 25’000 or more 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 Swiss Stamp Tax (also known as Swiss Stamp Duty) will be charged on BUY/SELL transactions in your Account. This tax is not included in our management fee. 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.
Because we believe in investing for the long term, we do not engage in active daily trading which would incur additional Stamp Tax.

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.

What about VAT?

All management fees are listed as being exclusive of VAT. VAT should not be charged on the management fee, but if we are required to charge it by Swiss Law this will be charged in addition to the stated fee.

Note:

If your Account balance is below CHF 48’000 you should consider the monthly fee against the value of your Account. For example:
— A monthly CHF 20 fee on CHF 40’000 works out to 0.6% a year.
— A monthly CHF 20 fee on CHF 30’000 works out to 0.8% a year.
— A monthly CHF 20 fee on CHF 20’000 works out to 1.2% a year.
— A monthly CHF 20 fee on CHF 15’000 works out to 1.6% a year
— A monthly CHF 20 fee on CHF 10’000 works out to 2.4% a year.
Simplewealth. Your investment. Your future.