• Debit order investments – you can make regular payments,
e.g. monthly, into your account; and
• Switching – as there are many different collective investment
portfolios, you can switch between different portfolios at little or
no cost.
Do all unit trusts have equal risk?
All investment carry some degree of risk that could affect the
value of your savings. It’s important for you to know the type of
risks associated with the investment you make. In this regard,
ask your financial Adviser to explain the type of risk associated
with your potential investment.
What information should a financial advisor disclose to
you when recommending an investment product?
Your Financial Advisor should be able to provide you with
up to date information about the various investment products
What are financial advisors (FA)?
A financial advisor, who is also referred to as an “Authorised
representative”, is a person authorised by a manager to solicit
investments in a portfolio from members of the public or to give
financial advice or make disclosure of information to investors
or potential investors concerning the sale, repurchase, issue or
cancellation of a participatory interest;
What is the role of a financial advisor?
A Financial Advisor must take all reasonable steps to:
Determine your investment objectives, risk tolerance,
financial situation and investment experience;
Ensure that the product s/he recommends is suitable for you,
taking into account all the information you gave; and
Explain to you why the product s/he is recommending is
suitable for you.
Financial Advisors in Namibia are currently not required
to register with NAMFISA, therefore, the onus lies with the
consumer to understand the following terms before investing in
a unit trust fund:
What is a unit trust?
A Unit Trust Fund pools money from investors and invests it
in a portfolio of assets according to the fund’s stated investment
objective and investment approach. Through a unit trust fund,
an investor can also achieve a spread of investments in assets
such as shares, bonds, deposits, money market instruments, real
estate etc. A unit trust is a fund which adopts a trust structure.
The pool is managed by a team of full time professionals and a
trustee is appointed to protect the interests of the unit holders.
What are the benefits of investing in a unit trust?
A financial advisor must be able to explain the benefit of
investing in a unit trust. However, some of the benefit are listed
below as follows:
Professional Investment Management: Unit Trust
Management Companies hire full-time investment professionals
to manage the investment portfolios; These managers have realtime
access to market information and they are able to execute
trades in a very quick and cost-effective manner;
Affordable and Easy: Unit Trusts are affordable as you can
invest small amounts of money (as little as N$100 per month)
and this makes it possible for more people to easily invest in
underlying assets that they normally would not be able to afford;
Diversification: Unit Trusts invest in a broad range of
securities. This limits investment risk by reducing the investor’s
exposure to a possible decline in the value of any one security.
This implies that investors may benefit from diversification
techniques that are usually only available to large investors
who are able to buy significant positions in a wide variety of
securities;
Liquidity: Unit Trusts in Securities are easy to sell which
means that you can sell all or part of your investment at any time
and get your money back in a prompt manner at the relevant
market related prices;
Transparency: You get regular information on the value of
your investment and you may be able to obtain information on
the specific investments that are made by the Unit Trust Fund;
and
Different investment options: Unit Trusts in Securities offer
flexible investment options as you can make:
• Lump sum investments – these can be made at any time
once you have opened your collective investment account;
• Debit order investments – you can make regular payments,
e.g. monthly, into your account; and
• Switching – as there are many different collective investment
portfolios, you can switch between different portfolios at little or
no cost.
Do all unit trusts have equal risk?
All investment carry some degree of risk that could affect the
value of your savings. It’s important for you to know the type of
risks associated with the investment you make. In this regard,
ask your financial Adviser to explain the type of risk associated
with your potential investment.
What information should a financial advisor disclose to
you when recommending an investment product?
Your Financial Advisor should be able to provide you with
up to date information about the various investment products available to you (in accordance with your risk appetite), the
associated costs and the services they provide to you. When a
financial advisor is recommending a unit trust to you, s/he is
required to disclose the key features of the product including the
following:
Nature and aim of the product: Whether the product is a
unit trust (in securities or property), and whether it is meant for
protection, savings or investment.
Benefits of the product: Information on the amount and
timing for payment of benefits and whether the benefits are
guaranteed or non-guaranteed.
Risks of the product: Take the time to understand whether
the funds you’ve shortlisted actually fit in with your risk profile
before you invest in them. Details of the risk factors that may
result in the benefits payable as stated in the prospectus or
profile statement (for a unit trust).
Details about the fund manager: The business address and
permitted activities of the fund manager, and the relationship
between the fund manager and the Financial Advisor.
Fees and charges to be borne by you (investor): Details of
the amount and nature of fees and charges to be paid by you,
and the frequency of payment.
Tax on profits: Details on the withholding tax to be charged
on dividends earned and calculations thereof.
Warnings, exclusions and disclaimers: Information on the
procedures, charges and restrictions for withdrawal, surrender
or claim of the product.
Reports that you are entitled to receive: Details of how often
you can expect to receive reports on your unit trust investment
and how you can get the reports (email, Post, website, etc.).
Time Horizon: Determine whether the unit funds you wish
to invest in fit your time horizon goals.
Fund distributions?
Find out how frequently the fund will distribute (interest).
Switching between funds/ portfolios?
Find out whether you have the option of switching between
funds and the costs involved.
What documents must a Financial Advisor give me when
recommending an investment product?
A summary of the information obtained from you on your
investment objectives, financial situation and personal needs;
The specific recommendations of the Financial Advisor and
the basis for the recommendation;
A copy of the prospectus or profile statement (for unit trusts
only);
A copy of the product summary and benefit (fund fact sheets);
Get your Financial Advisor to explain what is in these
documents.
Read the documents carefully, including the fine print, and
ask your Financial Advisor if there is anything you do not
understand or are unsure about.
How do I check whether a unit trust is approved for offer
to the public?
A list of approved management companies and funds is
immediately available upon request from the NAMFISA.
In addition, the management companies are issued with
registration certificates which must be visible at the management
company’s offices. Lastly, all registered unit trust funds are also
listed on the Association for Unit Trusts website.
Although there are laws and guidelines to aid investor
protection, it is ultimately the investor’s responsibility
to evaluate the suitability, profitability and viability of an
investment. An investor must read the information which is
required to be provided in the prospectus and make the decision
whether to invest or not, based on their own circumstance and
attitude to risk.
What reports can I expect to receive for my unit trust
investment and how frequently will these reports be sent to me?
Information pertaining to the performance of your unit trust
investment must be provided to you on a quarterly basis or at
financial year end of the company. This information includes:
• Annual Reports and Performance Statements from the
Fund Manager.
• Monthly or Quarterly Fund Fact Sheets
• Investment Statement
