10X Investments aims to awake people to the truth about seemingly insignificant investment fees and spur them into action with a fee-free offer this month.
Steven Nathan, 10X founder and chief executive, said he hoped the offer – anyone investing in a new 10X retirement product in June, whether transferring an existing fund to 10X or starting a new one, will pay no fees until January 2020 – would further advance 10X’s mission to make people aware of fees and to help them retire with more money.
“Most people are unaware of fees, they ignore fees and end up a with a lot less money at retirement because fees have eaten into their capital over time,” Nathan said.
“This can leave you with half the income you should be retiring with, and is a big contributing factor causing 94% of South Africans to retire with inadequate finances.”
10X wants to make people aware of fees, he says, “getting them to question their fees, and to rethink whether they are getting the best value for their retirement savings”.
Nathan said a second part of this mission was to help people understand the long-term impact of fees, which was “a big contributing factor to why most South Africans retire poor”.
“Fees of an extra half a percent or one percent may seem insignificant but the compound impact of that half or one percent over your whole working life can really ruin your retirement,” he said.
Another big point of the fee-free campaign, according to Nathan, was to get people to take action.
“What normally happens is that people get very frustrated when they try to find out what they are paying in fees. They get thrown off track when they get stone-walled along the way. Despite legislation in South Africa that says customers should be treated fairly, most people struggle to get transparent and complete fee information from their retirement fund providers.”
He said this could cause them to lose motivation and put it off to a later stage, which may never happen. “We are issuing a call to action with a very attractive fee-free promotion to spur people to take action now, rather than delay further,” he said.
“We expect to spur people to ask questions now,” said Nathan. “We hope they will act if they find they would be getting a better deal with 10X, and we believe the vast majority of people will have a better value proposition with 10X.”
Nathan added: “We hope this campaign will motivate South Africans to act now, rather than delay by another year or two or even more, which is not in their best interest as it will mean they will retire with a lot less money.”
10X has run similar offers before and customers who have taken advantage of a previous offer have benefited from more than the fee reduction because the company has consistently outperformed the average fund manager in South Africa.
The disruptive investment company’s first fee-free offer was run to mark its 10th birthday at the beginning of last year, an event that turned into a double celebration when the company recorded industry-beating performance for its first decade.
10X’s annualised return over its first 10 years was 11.3%, 0.8% above the large fund manager average in the 2017 Alexander Forbes Large Manager Watch (LMW), Global, Best Investment View Category. This outperformance was before any fee differential was taken into account.
10X charges less than 1% before VAT in fees, which is 2% less than the estimated industry average for individual investors, which comprises advice, administration and investment fees. The additional 2%, which accrues to investors’ accounts and compounds over years, makes a huge difference in the long run.
“We’ve consistently beaten the country’s large manager average. When you factor in the average 2% in fees that we save our clients those returns look even better,” said Chris Eddy, 10X’s Head of Investments. “The difference compounded over a 40-year saving period really is the difference between a dignified retirement and a dismal one.”
“No one can realistically predict what the market will return over the next year,” he says. “The only thing that is guaranteed with any certainty is the fees that you pay.”