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INFORMATION

The EAC measure is a standardised disclosure methodology that can be used by investors and financial advisers to compare charges on most retail investment products and the impact on investment returns so that investors can make better informed decisions around retail savings and options in terms of investment products.

How will the measure be disclosed?
The EAC comprises four separate components into which various charges are allocated. The components are:

  • Investment Management Charges (IMC)
    The investment management component includes all costs and charges for all underlying investments, as set out in the "ASISA Standard: Calculation and Disclosure of Total Expense Ratios and Transaction Costs". In the absence of a TER or Transaction Costs, an equivalent charge calculated according to the principles in the "ASISA Standard" should be utilised.
  • Advice Charge
    All charges that an investor incurs for the provision of financial planning by any financial adviser or representative (as defined in FAIS) are included in the advice component. Where the adviser charge is not facilitated by the provider, or the investor has not engaged the services of an adviser, the advice charge must be reflected as 0.0%. In such a case, a footnote must be included explaining that as no advice fee has been supplied, none could be included in the calculation.
  • Administration Charge
    The administration charge component includes all charges that an investor incurs relating to the administration of a Financial Product. Termination charges, exit penalties, loyalty bonuses or any similar structures are excluded from the administration charge calculation.
  • Other Charges
    The Other calculation is only shown if not a zero value and should include all termination charges, penalties or loyalty bonus payments that are reasonably foreseen if the investor terminates his or her contract and withdraws all of the funds at the end of the disclosure period. In essence it is the "catch all" to contain any remaining charges that will be levied against a Financial Product.

The EAC is calculated separately for each of the four components in isolation and then summed to derive the EAC for the Financial Product as a whole. The value for each of the components, as well as the total EAC, is displayed in a table at four mandatory disclosure periods. All values are to be shown in percentages. All charges that an investor incurs and will incur over the relevant period are included in the EAC measure for that Financial Product. Where a charge is not available, a reasonable best-estimate must be used and explained in the free text notes.

Where will the measure be disclosed?
The measure is to be disclosed in point of sale client documentation such as, but not limited to, quotations and proposals. At all times members should make every effort to ensure that the EAC is available at point of sale, including direct sales. Where clients initiate the investment directly, members would need to take client interest into account and not unnecessarily delay implementation if it would prejudice the client.

What about existing Financial Products?
The Standard makes provision for phased implementation for existing products. A provider must disclose the EAC of that Financial Product on an annual basis and whenever a Qualifying Event takes place. Qualifying Events are limited to any additional investments into an existing product whether by way of a recurring premium increase or lump sum; changes in intermediary remuneration charges; Section 14 and Directive 135 transfer benefits. Non-qualifying events include: annual contractual premium increases; premium reductions/terminations; a discontinuance or termination of a Financial Product; and withdrawals of investments. Providers must also be able to provide an EAC for all Financial Products on request.

Foreign Registered Products Approved and Marketed in SA?
If marketed in South Africa by an ASISA Member then adherence to the EAC Standard is required.

For detailed information relating to EAC, please refer to the standard .

Wanderer

Our EAC calculator was developed by Correl8 in accordance with the ASISA standard and stress-tested by leading industry participants in collaboration with our development team.

The calculator assists you with managing your EAC implementation in the most effective manner. You will have access to vital management information in real time, which will enable you to manage investor EAC quotes on demand. It will also provide you with access to a calculation breakdown.

Our calculator is integrated with Finswitch, which means once you are setup and have provided the fund MANCO and Finswitch Code, you are able to tap into existing Total Expense Ratios (TER's) and add the other elements to calculate EAC for investors.

This provides clear and accurate reporting to investors and peace of mind to CIS managers, investments managers and administrators.

A demo has been setup and is available here

The demo uses the following fund details as an illustrative example:

  Initial Recurring
Fund IMC Advice Admin Other IMC Advice Admin Other
Balanced Fund 1.5% 0.0% 0.0% 2.0% 1.0% 0.0% 0.0% 0.0%
Cautious Fund 0.0% 2.0% 0.0% 0.0% 1.0% 1.0% 0.0% 0.0%

Wanderer
Wanderer

With Phase II+ becoming a reality on 1 October 2017, EAC is soon going to be a requirement for all investors, not only those making changes to their existing investments.

To this end, we have a service based offering to facilitate bulk EAC reporting, either by means of PDF statements or bulk data output for seamless integration with your existing reporting to investors.

We use the current framework to determine the EAC for existing investors and send the result back to you for seamless integration with your existing reports. Our calculator is integrated with Finswitch, which means once you are setup and have provided the fund MANCO and Finswitch Code, you are able to tap into existing Total Expense Ratios (TER's) and add the other elements to calculate EAC for investors.

Alternatively, outsource your investor reporting to us and we will produce the reports exactly to your standard, reflecting your investment strategy, including EAC and TER components.

For more info on this service, please Contact Us

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The CORREL8 approach to data is structured, agile and bespoke, serving your organisation's needs on your terms. Our discovery process for business intelligence engagements ensures that we exceed our clients expectations. We adopt a top-down approach, where clients participate in the creation of storyboards and mockups prior to the development and implementation of the solution, to avoid rework and misaligned expectations.

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