Live your own life, stop trying to keep up with the Joneses
Imagine high fees as an attack on your retirement savings and listen to some advice from Ian Fordred, a veteran of the South African National Defence Force, who urges retired people and retirement savers alike to find out what they are losing to fees.
“Retirement savers need to look at the fee structure,” says Ian, who retired officially around five years ago. “Most people (and I am talking about 80% of my friends) don’t know what their fee structure is.”
He adds: “Talking to friends and colleagues, they will say they are paying only 0.75% but they aren’t aware of the underlying fund manager’s fees, the administration fees and other fees added to that 0.75. Eventually they get to a fee of between 2 and 3%.”
The difference between a fee of 2% and 0.58% might not sound like an awful lot but, says Ian, the difference it makes over time is “massive”.
And he should know: It is what he has been saving since his son persuaded him to move his retirement savings from another provider, where he paid a total of 2%, to 10X, where he pays one simple fee of 0.58%. Now he is hoping to encourage friends and colleagues to defend their savings too.
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He says retired people need to take into account inflation, their drawdown and the fees they pay, which all impact the money they are going to have for the long term.
“It is important that all those factors be considered. The one that people are not considering sufficiently is the fees,” says Ian.
“Their drawdown may be 4% (which I think is the guideline to ensure you have sufficient funds for your whole lifetime), but they forget about the fees and the impact they are having.”
He worries that ignoring this key factor puts many pensioners at risk of running out of money.
“When I first did the analysis and looked at the structure, especially the impact of the fees, it was actually a wake-up call to see how much money I would lose over the longer term.”
Think about it: nearly an extra percent and a half of the value of your entire savings pot every year for the rest of your life. In Ian’s case, those savings were accumulated over 41 years of hard work in the SANDF, so you won’t be surprised to hear that he wants to protect other South Africans from this ‘enemy’ too.
It was Ian’s son, a chartered financial analyst, who persuaded him to move his funds to 10X, largely because of the fee saving. Ian and his son are also fans of 10X’s passive (index-tracking) investment philosophy. “There are some active managers that sometimes outperform the passive environment, but they are definitely in the minority.”
Ian says he was a little bit nervous to move his life savings, but he did a lot of research with the help of his son and, in the end, the move across was seamless. He has full confidence in 10X now, although he does like to keep an eye on his investment via the 10X client portal, My10X.
“You have got a very easy app. You can go on and look at your fund. It is very user friendly and easy to manage.”
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Ian adds: “You have full visibility of your funds. With 10X, you know exactly where you are. You are kept in the picture at all times. I am comfortable that I will be able to live to the expected age with sufficient funding in place."
“I am comfortably retired, and I have got faith in what 10X is doing with my funds.”
The views expressed in this interview are Ian Fordred's opinion, based on his personal experience, and should not be construed as financial or tax advice. Ian Fordred was not paid for this interview although 10X compensated him for time spent and expenses incurred on the day. 10X Investments is an authorised FSP.
