Make fees a part of your financial planning strategy


Wednesday, December 06, 2017

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This week our income ideas panel offers the idea that in planning for fees as a part of business life you can recover profitably over time. From business banking to stocks to real estate, the myriad of fees one must pay can add to the initial cost of acquisition, yet, over time, the right purchase will more than pay for itself.

For small businesses, Dino Hinds of Micro Financing Solutions notes: “I am not sure that small business owners can totally avoid these fees or fully pass on them to their customers if they want to remain competitive. However, what is possible is for us to shop around to find those institutions that are charging the lowest when it comes to fees.”

So like the commercial says, 'when banks compete, you win'. Hinds continues, “The financial landscape is getting more competitive and in recent times two additional institutions have received licence to operate as commercial banks. As these new institutions and the smaller banks look to grow their market share they will most likely be charging lower fees.”

Additionally, he said, “Building Societies and credit unions are also known to charge lower fees than commercial banks. So if the services that you need are offered by these institutions then we should utilise them. Having been on both sides of this debate, having been a banker and now a small business owner, I am sympathetic to both points of view. So my advice to business owners is to ensure that in doing your projections ensure that the fees being charged by your banker are taken into consideration.”

Now, one of the biggest fees class in Jamaica relates to real estate. Many people may be familiar with the listing of Government fees that are involved. However, attorney at law, Robert Taylor, suggests there are other costs that have not been considered.

“The imputed cost that do not fall under fees but is very important is the time value of money. The purchase side of the transaction could take 30 days if purchasing with cash. And that is good. However, the sell side — assuming a buyer is found — could take up to 90 days assuming the purchaser will need a mortgage. And if a mortgage is needed, the entire transaction could take 12-18 months so any return should be calculated on that basis.”

So if one is looking to profit from the fees of buying real estate, the actual buy price is the most important figure available. And as a reminder, Taylor outlines the fees involved in real estate.

1. Purchase

-Purchaser's half cost of Stamp Duty of 2 per cent.

-Purchaser's half cost of Title Registration Fee of 0.25 per cent.

-Attorneys fees in the range of 2 per cent or less depending on the size of the transaction.

-TOTAL FEES OF 4.25 per cent.

2. Selling

-Vendor's Transfer Tax of 5 per cent.

-Vendor's half cost of Stamp Duty - 2 per cent.

-Vendor's half cost of Title Registration Fees - 2 per cent.

-Attorneys fees - 2 per cent.

-Realtors fees - 5 per cent.

-TOTAL FEES OF 16 per cent.

Now, our income ideas panel always includes career opportunities as we recognise that not everyone wants to be an investor or a business owner.

According to UWI lecturer, Dr Carolyn Hayle, the idea of fees in the business world can create sustainable career options.

“When we are the subject of fees, that means somebody has to tally the money,” Hayle notes. And she outlines the top three careers (besides accounting) that would allow you to profit from the need of businesses to watch fees.

According to Hayle, “The top three jobs that would help you 'watch the fees' are general manager, a financial analyst, and an investment analyst. These careers are specialisations within an MBA programme. Let us look at the general manager. I personally am trained as a general manager. When I operate in that capacity I am responsible for running the business. For the general manager to be effective and while she has knowledge and understanding of the financial side of the business she needs her financial analyst to crunch the numbers and advise on the strategy for the efficiency within the business.”

Both the general manager and the financial analyst can make the most from saving the business unnecessary fees which in turn allows them to grow the business.

This leads to the third top job from Dr Hayle. She notes that the investment analyst looks at “providing stockbrokers, fund managers and stock market traders with financial information, advice and recommendations derived from global investment data. Working hours in investment banking are notoriously long but remuneration is generous”.

Hayle adds, “This person is external to the firm, but his work is critical to the general manager because it helps her to decide on the best options to exercise in terms of investing money for the firm, including deciding on the best place to put funds dependent on fees and other charges. So, there you have it, three different types of positions that look at the numbers, manage the funds and get the best yield for the business.”




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