The problem with our industry’s problem

We have a very poor savings culture so individuals must take some responsibility. But most of those who do save diligently also have to work longer or retire poorer than they’d hoped, or both. So it is the retirement industry that should shoulder most of the blame.

The industry has, for generations, over-promised and under-delivered, charging too much for products that produce too little. The industry has made obscene amounts of money off its clients, and not nearly enough for them.

We are calling the industry out on this and the industry doesn’t like it. Of course, fund managers, administrators, product developers, brokers and advisors all have vested interests. So they tell us that pointing fingers is not a good look. They say that if all we can do is criticise our competitors it must mean we don’t have a satisfactory solution ourselves.

Actually, we have an extremely good solution. But no matter how much we talk about our solution (and we do, a lot), it’s irrelevant if people don’t know there is a good reason to listen. So, frankly, having a solution is only half our job done. If we are going to successfully help people retire better, the other half of our job is making the public aware that something is not right, and that it is going to affect them.

Failing that, they’ll realise only when they actually want to retire and find out their investments won’t do the job they had expected them to do, which is buy them a decent retirement. By which time it will be far too late.

In short: the problem is that people don’t know there’s a problem.

A similar problem of awareness existed around smoking. There was a time when “everybody was doing it”. When the truth about smoking emerged the tobacco industry resisted it – much like some of our detractors in the retirement industry have.

Being the breaker of bad news is, as they say, a dirty job, but someone’s gotta do it, and that someone isn’t going to be an industry with so much to lose.

Over time – and it does always seem to take some time – people learnt about the dangers of smoking. Now, if you smoke, you do it with full awareness and at your own risk. Unfortunately, we’re not there yet with retirement investments, so people don’t buy these bad products fully knowing what they’re getting themselves into.

Another example encompasses electric vehicles, Tesla specifically, and the fossil fuel industry (which arguably includes automotive manufacturers). Tesla was not the first maker of electric vehicles. Part of the reason its predecessors failed must be, largely, because of the problem of awareness. Comparatively few people cared about fossil fuels, climate change and sustainability in the 20th century. Now concerns about this are a ubiquitous part of public discourse. Tesla doesn’t have to point to the fossil fuel industry because that job is being done for them. They have the luxury of being able to focus on the quality of their solution.

10X doesn’t. We still have a problem of awareness. Not only do people not talk about what their retirement products cost, they don’t know what their retirement products cost. Even more problematically, they don’t think to ask what their retirement products cost. They also don’t think about how little their money is growing, nor how much money the industry is making.

Again, this is particularly pronounced in South Africa. The conversation started in the US 40 years ago, but even there it took until the mid-2000s for people to really start taking notice. Here, awareness is still in its infancy.

So people may urge us to not “mention the war” and they may complain about our accusatory tone. But how do you talk about a problem without pointing, implicitly or explicitly, to who is responsible? More importantly, how can we not talk about it if we really want to help people retire better? Nobody cares about solving a problem if they don’t know there is one.