An additional percentage point in annual investment fees may seem insignificant, but over a lifetime it can compound into millions in lost retirement savings. Yet many South Africans remain unaware of the fees they are paying to invest and grow their wealth.

An investor paying just 1% more in annual investment fees could retire with R3.5 million less than someone paying lower fees.

According to Rory Brachner, founder of Doshguide – a platform of flat-fee financial advisers – two South Africans investing R3 000 a month over 40 years, each earning an average annual return of 10%, could end up with vastly different retirement outcomes simply because of the fees they pay.

The investor paying 1% in annual fees would accumulate approximately R14 million, while someone paying 2% would retire with around R10.5 million. At a total annual cost of 3%, the same investment would grow to only R7.8 million – almost half the value achieved by the lower-cost investor.

The one factor you can control

“People spend a lot of time chasing an extra one or two percent in investment returns, yet very few stop to ask what they’re paying in fees. The irony is that returns are impossible to predict, while fees are known in advance and, in many cases, can be reduced. They’re one of the few factors investors can actually control,” says Brachner.

The impact of fees is increasingly being recognised globally.

Morningstar’s 2026 Annual US Fund Fee Study reinforces one of its longstanding findings: lower costs remain one of the strongest predictors of better long-term investor outcomes.

The study found that US fund investors paid record-low average fees of 0.32% in 2025, down from 0.80% in 2006, saving investors an estimated $6.8 billion in fund expenses in 2025 alone.

Morningstar attributes this decline to a combination of greater investor awareness, increased competition among asset managers, the growth of passive investing, and a broader shift towards fee-based financial advice.

The trend highlights a growing focus among investors on understanding costs and ensuring more of their returns remain invested.

The Effective Annual Cost standard

One of the biggest challenges for local investors is understanding what they are actually paying. Banks, insurers, investment platforms and fund managers all disclose costs differently, leaving consumers to navigate a maze of percentages, platform charges, administration costs and adviser fees that are rarely presented in a consistent format.

To improve transparency, the industry body ASISA introduced the Effective Annual Cost (EAC) standard in 2016, which requires product providers to disclose investment, advice, administration and other charges as separate annualised percentages that sum to a single total cost figure.

Brachner believes it is one of the most useful yet underutilised tools available to consumers. “If every investor asked one question, it should be: ‘What is my Effective Annual Cost?’“ he says.

“It immediately allows you to compare different products on a like-for-like basis.”

The EAC breaks costs into four broad categories: investment management fees, adviser fees, administration fees and other charges, including potential penalties or contractual costs.

Looking at these costs together gives investors a far clearer understanding of what they are paying than examining individual fee disclosures in isolation.

Brachner says many of the people who approach Doshguide have never questioned the fees attached to their retirement annuities, investment portfolios or insurance products.

“We’ve seen people paying total fees of 4% or even 5% a year. Most of the time they didn’t know they could ask, and nobody explained how those fees would affect their long-term wealth.”

For Brachner, this is where the real value of financial advice should lie.

“A financial planner shouldn’t just be recommending products. They should be analysing every fee you’re paying, challenging whether those costs are necessary and making sure your money is working as efficiently as possible.”

He believes the structure of financial advice is an important consideration. A flat-fee model separates the cost of advice from investment products and assets under management, creating a different incentive structure from traditional percentage-based advice models.

“Too many investors spend years chasing marginally higher returns while overlooking the fees quietly eroding their investments. Over decades, those hidden costs can become one of the biggest obstacles to long-term financial success – not because the market failed them, but because they never questioned what they were paying to participate,” concludes Brachner.

This post was based on a press release issued on behalf of Doshguide.