One of my greatest frustrations with the financial industry is the lack of simple, cost effective, flexible savings products for people who want to start saving, but have only R100 to R200 per month to put away.

While R200 may not seem like a lot of money, just by investing that each month into a stock-market-related investment account you could have saved R46 000 within ten years.

I often engage with the industry, especially the life insurers, around this issue and they always argue that providing products for less than R500 per month is very expensive.

There is the cost of collecting the money, the cost of managing the money and the cost of advice – these create fixed costs which, ironically, mean that the less money you have, the more fees you pay as a percentage of what you are saving.

They argue that one of the big drivers of costs is sales distribution and paying for advice. In order for a customer to purchase the product, they need to engage with an adviser who is turn has to fulfill the many legal requirements under the Financial Advisory and Intermediary Services Act (FAIS). This costs the advisers in both time and compliance regulations.

The very regulation that is supposed to protect investors actually hampers the ability of companies to deliver cost-effective solutions. I often write that collective investment schemes such as unit trusts and exchange-traded funds are great low-cost, flexible investment solutions compared to traditional life policy products such as endowments. Yet an adviser needs further qualifications in order to sell these products to clients and these more qualified financial advisers tend to focus on the higher-net-worth market.

The majority of “linked-agents” (those advisers working for life insurance companies) are only qualified to sell investments wrapped within a life policy which means most customers are sold inflexible endowment solutions where they have to commit to a monthly investment over a set period of time.

What is needed is a no-advice, low-cost, simple product that anyone can invest in. So I confess that it was with some excitement that I heard David Lloyd, Managing Director of Liberty Investments arguing this week that he believes it is possible to deliver an investment platform that can provide tax-free investments using the new government tax-free savings plan from as little as R50, whilst keeping costs low.

Lloyd says such an investment platform would allow customers to decide what level of advice they required and pay fees accordingly. The lowest cost would be a simple proposition of one product, the choice of two or three funds and no advice. While there could also be a limited-advice version with more products, slightly more fund choice and also investment tools such as portfolio selection and tracking to goals, with fees linked to providing that advice.

Lloyd added that the fund selection should be limited so as not to overwhelm investors with choice and that it should allow for ad-hoc payments for people who cannot commit to monthly contributions.

While this is all still in discussion phase, it is a promising start and I am hoping to see Liberty, and other product providers, thinking out of the box and delivering feasible options to get people saving.

This article first appeared in City Press