What Is Your Effective Annual Cost (EAC) and Why Should You Care?

Understanding the EAC

If there is one number every South African investor should know, it is their Effective Annual Cost (EAC). The EAC is a standardised measure that captures the total cost of your investment, including management fees, administration fees, platform costs, advisor fees, and transaction costs, all expressed as a single annual percentage.

Unlike the Total Expense Ratio (TER), which only captures fund-level costs, the EAC gives you the full picture. It is the only reliable way to compare the true cost of different investment products on an apples-to-apples basis.

Why Most Investors Don't Know Their EAC

The financial industry does not make it easy to find your EAC. Fees are often split across multiple layers: the fund manager charges one fee, the platform charges another, and your financial advisor takes a separate cut. Each of these may appear small in isolation, but together they can add up to 2.5% or even 3% per year.

To make matters worse, many older investment products use complex fee structures with initial fees, ongoing fees, loyalty bonuses, and early termination penalties. This deliberate complexity makes it nearly impossible for the average investor to calculate their true cost.

What Is a Good EAC?

As a general guideline, a total EAC of 1% or less is considered competitive in the South African market. Low-cost providers like 10X, Sygnia, and Satrix have demonstrated that it is possible to deliver strong returns with total fees well below 1%. If your EAC is above 2%, you are almost certainly paying too much.

How Invest-Audit Can Help

At Invest-Audit, calculating your EAC is at the heart of what we do. For a flat fee of R499, we analyse your retirement annuity, endowment, or unit trust and calculate your exact Effective Annual Cost. We then show you, in plain language, how that cost impacts your long-term wealth. No jargon, no sales pitch, just the truth about your money.