• Linked Products
• Managed Funds
• Retirement Products

Linked Products

A linked product provider, or Linked Investment Service Provider (LISP) is essentially a wholesaler of unit trusts - buying unit trusts in bulk from the unit trust management companies and selling them on to retail investors, most often as a branded product (that incurs its own costs) and usually through financial advisors or brokers.

A linked product is therefore an investment product largely based on a managed portfolio of unit trusts. Although the unit trust management companies are getting better at directly serving investors, the bulk of investment in SA unit trusts has traditionally been via linked products providers.

• Annual costs are higher. Clients have to pay for the administration fees of the linked product companies, as well as the annual costs of the unit trust management company. Broker commissions are often factored in, but..
• You get lower switching fees than if you're dealing directly through the unit trust management companies (ie. when you sell from one fund and buy another), and..
• You deal with just one entity that provides a a consolidated statement of your investments - certainly a big convenience and time saver to the small investor in a busy world.

Equinox.co.za is a registered LISP - with a difference. Our Recommended Portfolios are free investment recommendations. We pass our wholesale discounts directly on to our investors, with no extra management fees. Our online trading system not only allows transactions costs and administrative fees to be ridiculously low, but also gives our investors real-time portfolio monitoring and 24-hr service.

A Brief History of linked product companies

In the late 1980s the pioneers of the linked product concept, UAL Merchant Bank, examined the factors preventing the growth of the unit trust industry. They realised that unit trusts were thought to be poor value because they were expensive to buy and sell. UAL introduced a unit trust switching service, which enabled their clients to move unit trusts around inexpensively between rival fund management companies.

The concept of client-managed investments caught on and UAL realised that they had a winner. They realised that a tailored investment product that had transparent performance and costs would be a real threat to the "custodians of wealth" of the day - life assurance companies.

Linked product companies capitalised on the increasing frustration experienced by investors who wanted to buy traditional life assurance policies, but who wanted more answers about performance and costs than the life assurance companies were prepared to give. At the time, the life assurance companies tried their best to discredit the linked product concept. More recently, the life assurance industry has joined the party with its own version of a linked product, generally under an endowment policy umbrella.

The Future of Linked Products?

When they were first launched linked product companies provided an administration system for investors which allowed for cheaper initial fees and reduced switching costs. Competition was based largely on administrative efficiency with price being a key differentiator.

The industry has moved on and legislation introduced in June 1998 has enabled unit trust wholesalers to register as 'discretionary linked investment providers'. This means that they are no longer only administrators of unit trust funds, but are able to design and manage their own investment products for clients.

More recently, the asset management industry, of which the unit trust industry is a small part, has seen significant consolidation. Linked product companies are obliged to re-position themselves with respect to these changes. With decreased profit and tightening budgets, traditional linked product companies have to cut costs and target selected groups.

Equinox.co.za is in a different category. We are positioned to benefit from increased use of the Internet as an efficient communication tool and increased investor education. This enables our clients to buy, sell, switch and view their unit trust investments any time they wish. Furthermore the cost-effectiveness of our prices has attracted increasing numbers of clients.