How finance folk use it
Trust fees are the charges you have to pay when you have a trust fund. Specific unit investment trust fund (UITF), these are calculated according to the net asset value (NAV) of the fund. The usual range is 1% to 1.5% annually.
Trust fees include the custodianship fee (which goes to the bank for services such as account administration and transaction settlement) and the early redemption fee (which you must pay if you redeem your investment before the end of the minimum holding period).
A 20% withholding tax on the capital gains is also applied to UITFs, to be paid when you redeem your money. The amount is based on the gains in the difference between buying and selling NAVPU, and not the duration of your investment.
Some UITFs also impose a sales charge. More commonly seen in mutual funds, this goes to the fund manager for his/her efforts to take care of the fund properly and create profit for all investors.
Is it good or bad?
These fees are necessary for the trust fund to be run properly. This is especially true for the custodianship fee, which is used mostly for operating and maintaining the fund.
In general, most companies charge a reasonable figure for the trust fees. The exact amount and type of trust fees can vary among different banks or companies.
What it means for you
When considering making an investment, you should be aware that you’ll need more than just the actual investment amount. Every product has its own set of fees and charges, and these can vary according to the institution that offers it.
