My financial advisor was helpful, buuuut...

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of 10X Investments.

Way back when I first started investing in my post-work future (sometime in my 20s), I had an advisor who I trusted to guide me in where to put my money and how much to invest. Now, I have the opportunity to relook my investments and my relationship with advisors – and my research showed that I'm throwing away a lot of money in fees (I did some calculations further down if you're interested).

In retrospect, I wasn’t especially happy with that guy (I can't even remember his name - so much for a deep and trustful relationship). My unhappiness stemmed mainly from a lack of communication on his side. I had no idea what was going on with my portfolio. No clue as to whether I was investing enough (I wasn’t), and no indication as to whether I was heading in the right direction with my investments. No needs analysis was ever done.

Thankfully, I was able to move on and found someone who looked at my position in life more carefully. He was also able to help with other aspects of my financial life, including getting me the best insurance possible on both my home and contents. I won’t mention the insurance company here, but suffice it to say no-one has ever beaten their premiums and I have never had a problem with their service.

My current advisor also helped with cataloguing my assets and liabilities when I got divorced. This was especially important because I was married out of community of property with accrual. And I accrued, because by then, I was putting a full 15% of my gross income into my retirement annuity.

But now, my advisor is finally retiring. He’s slowed down a lot with his business and is handing over his remaining clients to a wealth management company. I still don’t quite understand what, exactly, this means for me and a meeting with the new person has been scheduled.

This change did, however, give me pause to think. I had a close relationship with my advisor and he understood where I was personally and financially, which certainly aids with decision-making. Now, I need to make an informed decision about what is right for me.

To work for you, your investments need to be aligned with where you are on your life. I’m at a different stage in my life from where I was in my 20s. It’s now time to relook everything: I'm closer to retirement, understand the personal finance world better than I did back then, and work for myself, so for one thing my income is variable.

I need to consider how best to be disciplined about investing when a monthly debit order isn't the solution. The benefit to a debit order that increases with inflation each year is that I had become accustomed to it going off every month, and I couldn’t include that amount as part of my discretionary capital.

Now I need to work out how best to ensure that a lump sum (and a decent sized one at that) gets invested each month. With that comes the question: which investment(s)? I need to understand what the pros and cons of different investment vehicles and ins and outs of their underlying funds to meet my current retirement savings needs.

Do I, for example, go all-in on a high-risk portfolio seeking the commensurate, yet only potential, reward? Do I put the bulk of my cash into something more stable, with less potential for growth? And should I be thinking about moving some of my discretionary investments to other providers or into other products?

Here - and it seems obvious - an advisor would usually come into the equation to provide me with all this input.

However, what if there was another way? Advisors charge fees and, while I might be able to negotiate a lower rate the more money I have invested, it’s still money that doesn’t go into my retirement, but rather into paying for advice.

What if I could benefit from sound advice that didn’t take money off the top of what I invest and would, as a result, lead to additional growth at a time when I really need it? It’s a well-known fact that South Africans don’t invest enough. I’m among them even though I have been investing. And it’s hard to put away enough given the cost of living – and that excludes the fact that, for my mental health, I need to get out of the house sometimes.

(Part of my need to escape is driven by exceptionally noisy neighbours who think it’s perfectly acceptable to start making a noise at 06.30 on a Sunday, but that’s a different story.)

So let's try and make this a bit more real.

If I have R1 million right now and invest R15k per month on top of that every month, and am charged around 1% total in fees, assuming an even 10% growth, that equates to roughly R1.3m in fees over the 20 years, and an investment balance around R16.3m. If I'm charged 3% total in fees, I end up paying around R3.2m in fees, and get out around R12.2m. That's a difference of R1.9m in fees, and R4.1m in accumulated capital! Those extra fees mean a lot of money isn't going into my portfolio and working for me over time. In fact, as fees grow with the investment value, that money is compounding against me.*

I have a lot to think about. I still feel like I need to talk to someone who understands where I am in life, yet I need to save and invest as much as possible. Fees could well be a hidden cost that is effectively robbing me of retirement money.

Did you know you can use 10X's EAC calculator to get an idea of the total fees you are paying?

*This calculation does not take into account the effects of inflation. If it did, and figures were presented in today's money, both the value of the total investment amount at the end of the 20 years and the total amount of fees paid would be lower.