Lower unit trust sales charges

By DALJIT DHESI

PETALING JAYA: Effective next month, sales charges for investment in unit trusts by Employees Provident Fund (EPF) contributors are expected to be slashed to not more than 3% from 5% to 6% now.A source told StarBiz that the move was expected as the current charges were relatively high compared with other countries, and for the industry to be globally competitive, the upfront sales charges should come down.

This would also reduce the cost of investment and improve returns as the current sales charges were eating into unit trust returns, he said, adding that the move, over time, would lower the overall sales charges in the industry. Pacific Mutual Fund Bhd chief executive officer and chief investment officer Michael Auyeung said the move was a positive development for the industry.

Lowering sales charges would provide investors a quicker path to garnering returns on their investment, and might encourage many to make regular withdrawals.
“Distributors who earnestly assess what the EPF is trying to do for its contributors will eventually see that this move will benefit everyone,” Auyeung said. From the perspective of unit trust management companies, most players would welcome the lowering of any hurdle that helped change investors' mindsets and allowed them to realise that unit trusts were an extremely viable investment and pension planning instrument, he said.

Furthermore, he said, the excuse that high upfront fees were keeping pensioned investors away had been partly overcome. Auyeung said when news emerged that EPF investors were losing money in unit trusts, Pacific Mutual conducted an in-depth study of its own investor base. “Total gains made by our investors between 2003 and 2005 were RM41.32mil while losses amounted to RM65,000. Most of the losses were incurred by recent investors who had yet to recover the fees they paid upfront,” he noted.

An industry player said: “Those unit trust management companies that rely heavily on agents would in the short term see a negative impact on their businesses.
“This is because the agents' customers mainly comprise EPF contributors. The lowering of sales charges would affect the agents' commissions which, in turn, would affect the companies' businesses in the short term.''