Almost every South African is facing the equivalent of a financial day zero in retirement, more than 9 in 10 of them in fact (according to Treasury figures), and surprisingly few are doing anything about it.
Steven Nathan, 10X Investments Chief Executive Officer, says the retirement crisis in the country is so severe that the best analogy is the water shortage in the Cape, where the City Council turned things around dramatically by upping the ante and warning that Day Zero, the day the taps were to run dry, was looming ever closer.
Nathan, who founded the disruptive asset manager as an alternative in an industry that traditionally puts its own interests ahead of those of clients, adds that unless people take charge of the process they are unlikely to get a good deal out of the industry.
“You will see in almost every single case that this is an industry working for itself and not for you as the consumer expecting to get the best value for your investments.”
But, he says, in today’s age of technology, the Internet, social media and so on, it is easy to find the facts and act on them. Once you do some research you will see that they speak for themselves, he says.
Instead of trying to predict the future by selecting individual stocks in the hope they will outperform the market, as active fund managers do, 10X tracks the index, which delivers the return of the market as a whole at a very low cost.
A quick search on the internet will deliver numerous links to respected financial and research organisations, from the Economist to Morningstar to Standard & Poor’s, showing that a significant majority of active fund managers, upwards of 80%, underperform their benchmark year after year. Active managers also charge high fees for effectively gambling with retirement savers’ money.
High investment fees eat into returns, and the damage compounds over time. One key way to radically improve investment return, says Nathan, is to switch to a low-cost provider, such as 10X. The industry average fee is around 3%; 10X charges less than 1%. That 2% higher cost compounds over the years and can result in the investor ending up with less than half the total investment return.
Technology is helping shift the power away from the big players and into the hands of ordinary people, says Nathan, urging people to take advantage of the opportunity to educate themselves.
“Ask questions, do your research and ensure your money is managed in a way that adds value for you and not just the industry,” he says.
“At 10X our whole objective is to get the optimal investment strategy to the client on a direct, cost-effective basis, and to empower people to take charge of their retirement planning.
“We have online retirement planning tools that engage you in a simple, user-friendly way and work out a realistic financial goal as well as a practical savings and investment plan to meet the goal.”
10X is launching a new customer portal, My10X, in May that will move the customer much closer to the goal of having full sight of and control over their investments. Customers will be able to see exactly where they are in relation to their savings goals. They will be able to make various changes to their savings strategy or adjust their expectations to better align their dream with their reality.
Nathan adds that My10X will also address the biggest reason so many South Africans are facing their own financial day zero: they do not save enough!
“The majority of South Africans don’t save enough. My10X will give tips and advice on how to save a little more every year without breaking the bank, to get closer to your retirement goal.”
About 10X Investments
In an industry famous for mammoth promises on a large, confusing array of products, most of which disappoint, 10X uses a simple, proven strategy to give individual and institutional investors the best possible chance of reaching their retirement investment goal: invest 15% of your income for 40 years in a high-growth index fund and pay fees of 1% per year or less.
10X relies on index tracking to deliver the returns of the market as a whole. Fees are a valuable tool for predicting future investment performance and the fees on 10X’s retirement annuity are less than half the industry average. 10X invests in a mix of shares, property, bonds and cash to maximise growth and automatically adjust portfolios as savers get closer to retirement to reduce risk.
Already got a retirement investment? Nine out of 10 investors could do better with 10X.
This article was published in partnership with 10x Investments.