Old Mutual responds to complaints of low returns

Client says underlying funds performed well, but fees absorbed most of his growth.
A look at the fund statements shows that Mr G is right on some points, but wrong in others in that he is not comparing like with like. Image: Shutterstock

A lot of people complain that investment returns a few years down the line fail to match their expectations at the time they signed up for an investment policy, including a concerned Moneyweb reader who started investing in a retirement annuity (RA) 16 years ago.

“It looks like high fees absorbed most of my returns. The underlying funds performed better than [I expected], but when I look through my statements the fees are very high,” he says, adding that there is a large discrepancy between the performance figures quoted by the individual funds included in his RA and the returns shown by the investment manager.

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In this case, the investment manager is Old Mutual.

Disappointing returns 

The client, let’s call him Mr G for ease of reference and to keep his financial affairs confidential, asked Old Mutual for a full history of his investment after he noted in a recent statement that the value of his retirement savings seemed much lower than he anticipated.

He added up all his contributions and came to the conclusion that “after 16 years, Old Mutual has turned my R393 000 into R470 000”.

He also noted that he would have been much better off if he had put his money in a savings account over the years.

He’s upset that isn’t able to cancel the investment policy without attracting a big penalty.

“The joke is that if I want to withdraw my funds, they will penalise my funds by R50 000. So I would have made nothing towards my retirement in 16 years.

“If I placed my monthly debit orders into a normal savings account at any ordinary bank and received 7% interest rate on average, I would have been sitting with about R2 million today,” he says.

A look at the fund statements shows that Mr G is right on some points, but wrong in others in that he is not comparing like with like.

Investment period

He is right to say that he has invested an amount of R393 000 over a period of 16 years, but that is not the same as investing R393 000 for a period of 16 years. The difference is huge.

Old Mutual says that Mr G started his investment in May 2005, investing R300 per month. The premium increased by 10% every year for roughly the first five years.

In December 2010, Mr G elected to effect a voluntary premium increase to R750 per month and in October 2011 increased the contribution to R2 000 per month. Thereafter, the premium continued to increase by 10% per annum on each policy anniversary.

In essence, only the first few instalments of R300 were invested for the 16 years to date and everything else for a much shorter period.

The bulk of his investment hasn’t had time to earn returns.

During the first six years of the investment plan, the total investment amounted to only R27 768. It was only this relatively small amount that benefitted from the longer investment period.

Old Mutual notes that the monthly premium on the policy is currently R5 187.34.

“Thus, in the last five years, although the premiums were higher relative to those paid in the first 11 years, they were invested for a shorter period of time,” says Marius Pretorius, head of marketing (retail savings and income) at Old Mutual.

“In addition, the growth would have been affected by adverse market conditions in the last five years,” says Pretorius.

One fund to blame

At around the same time that Mr G boosted his monthly contributions, he also made changes to the underlying funds in his RA.

He started with only one fund in 2005, the Nedgroup Investments Rainmaker Fund. Around 10 years ago, he added the Old Mutual RAF 40 Index Fund, Coronation Property Equity Fund, and the Allan Gray Equity Fund, splitting the monthly contribution between the funds.

Most funds did well, except for the property fund. The property sector on the JSE showed little growth between 2015 to 2020, and then the property fund in Mr G’s portfolio fell by around 50% when Covid-19 hit.

While most sectors recovered, the property sector did not.

Thus, close to 20% of the portfolio showed negative growth of around -4% per annum since Mr G diversified his portfolio.

“The poor performance of Coronation Property Equity Fund has negatively affected overall returns for this contract,” says Pretorius.

“The last four to five years have proved to be extremely challenging for most investment management companies in the equity market. Not only was market performance fairly flat from about April 2016 onwards, it was further exaggerated by the effects of Covid-19 on market performance.

“Three of the funds selected by the customer have experienced a recovery since March 2020. The Coronation Property Equity Fund, however, was the worst-affected of the four funds and has also been slower to recover, with an investment return over the past 9.5 years of -4.0% per annum,” says Pretorius.

Annual return on funds
(net of investment management fees)
Fund Total invested Term Actual investment return per annum Return quoted by investment managers*
Nedgroup Investments Rainmaker Fund R134 840 16 yrs 5.9% 6.4%
Old Mutual RAF 40 Index Fund R72 657 10.4 yrs 7.5% 8.4%
Coronation Property Equity Fund R69 477 9.6 yrs -4.0% 4.2%
Allan Gray Equity Fund R104 215 9.6 yrs 6.9% 9.6%
Total for RA R381 189 5.2% 5.2%
* 10-year annual return per funds’ fact sheets

Source: Old Mutual and individual funds

Quoting different returns

It irked Mr G that the performance figures quoted in the different funds’ latest fact sheets differ significantly from the returns quoted by Old Mutual on his portfolio. Even the property fund has grown by 4.2% per annum over the last 10 years, compared to the return of -4% according to his actual statements.

Both these figures are net of asset management fees, but the difference is that fund managers quote the annualised return on a lump sum investment 10 years ago rather than the returns on monthly contribution.

“The returns published in the fact sheets are at the fund level [fund price performance] over specified investment periods,” says Pretorius.

“This contract invests on a monthly basis, meaning that the returns are calculated on the growth applied to each monthly investment on a compounding basis. If the full amount had been invested 10 years ago, then the returns on the fund fact sheet could be used as a proxy to compare performance as the growth would then be compounded on the original amount invested over the period.”

Old Mutual reiterates that asset management fees as disclosed in the fact sheets, or disclosed when clients decide on a fund, are deducted from the pooled assets of the fund and the returns are therefore net of asset management fees.

Advisor fees

However, advisor and administration fees are still payable from these “net” returns.

Mr G raises a point that many investors might agree with: “It took all my growth.”

Old Mutual explains that commission is paid by Old Mutual to the advisor and then recovered through a monthly charge deducted from the fund value. “In the first year and most recent year, commission of just over R2 000 was paid to the financial advisor.

“The commission has varied somewhat in other years due to the voluntary premium increases done in 2010 and 2011. On average, commission of R2 371.98 has been paid per year, which amounts to less than R200 per month,” says Pretorius.

Old Mutual disclosed that a total of R37 016.77 has been deducted from the policy in the form of monthly charges. The monthly charge of 1.87% per annum is disclosed in the contract, which has reduced over time to 1.3% nominal per annum as the fund value has increased.

This covers the cost of commission (0.7%), as well as ongoing administration and other initial expenses (0.6%). Included in the 0.6% is an administration charge of 0.35% nominal per annum that is levied by Old Mutual on the value invested in external unit trust funds, says Pretorius.

That is a lot of fees – some 9.4% of the total contribution to the RA went to fees, in addition to asset management fees already paid to fund managers of the underlying funds.

High penalty fee

Then there is a high penalty fee if Mr G decides to cancel his RA.

Old Mutual would charge a reduction fee when the contractual commitment is altered, such as if premiums are reduced or stopped, funds are withdrawn before the end of the premium payment term, or cancellation of the plan by making the plan paid-up before the end of the investment period.

This reduction fee recovers the future charges in respect of the initial expenses incurred on the plan that Old Mutual will no longer be able to recover.

Old Mutual uses a rather complicated formula to calculate the amount, which means that a charge of more than R49 000 will be levied against the portfolio.

“This equates to 10.58% of the fund value of R464 923.43. This is well within the current regulated Multiple Causal Event Charges Limit of 14%,” according to a letter sent Old Mutual sent to Mr G when he queried the matter.

If Mr G cancels now, he will effectively pay all the costs of the investment for the whole period.

The total costs for this investment, including all the commissions and administration fees, will exceed R86 000.

Better off in a savings account?

Mr G says he would have been better off investing in a savings account. “If I invested my money at 7%, I would have close to R2 million now,” he says.

His calculation is far off. He probably assumed that he invested the whole amount on day one of the 16 years. Even then, he would hit ‘only’ R1.1 million.

“Assuming the customer could invest his premiums at a rate of 7% per annum [after charges and tax], the investment would have grown to R559 777.70 by May 2021,” says Pretorius.

On the face of it, this would have been much better than the RA.

Unfortunately, the assumption of earning an average interest rate of 7% per annum on small amounts is probably way wrong.

The argument also ignores costs and the annual tax benefit of investing in a RA.

Interesting case study

The comment about a savings account versus a retirement annuity opens up a whole new debate.

The stock market usually wins over the long term when comparing interest rates with the annual return on market indices, or by comparing the growth of a lump sum in a bank account with the growth in the JSE Top 40.

What would have been the best for Mr G?

His figures put an excellent case study on the table, deserving more analysis.

Meanwhile, he should probably seek more advice from a financial advisor.

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COMMENTS   85

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There is something wrong with the practice of never deminishing fees even if they loose you money.

I suspect OM and its peers are going to lose more money in round 3 of Covid-19 claims.

Buy PGM(s) and Iron ore and Copper mines

Old Mutual is really stilling from the poor, I had an educational policy with them and I ended up cancelling it. Even my retirement annuity fund is not growing, the interest is very low but I have contributed a lot of money for more that 13 years. I would really love to transfer my policies somewhere else but I was told I will get penalized. All these companies are now blaming everything to Covid-19, this robbery and stealing from clients started a long time ago before the pandemic. The government need to review and look at this insurance companies, their directors and CEO are pocketing lots of monies at our expense. This is really not fair, at least we should be allowed to transfer our funds to other companies without being penalized.
Even on facebook there is a group called ladies house, women were complaining about old mutual. They even advised other members to stay away from Old Mutual

…and the (much forgotten) fact that all interest, dividends & CGT gains within any RA Fund portfolio is growing TAX-FREE….and yet still, the investment returns are sub-par.

It just illustrates how high the RA funds hidden costs are 🙁

Old Mutual structures their RA funds to insure they get all the grouth. Should they get you 3%, you should consier yourself extremely lucky. Which begst he quation, how on earth did they come up with having the term, Mutual” in their name? What a joke

Yes. I completely agree with your statement. Surely the large amount of fees that Mr. G paid over 16 odd years would be cause for Old Mutual to have some kind responsibility to increase the funds and have some kind of result for being paid. They can sit idle and deliver a negative growth, but STILL get paid large fees for delivering nothing. I suggest Mr. G goes to the Ombidsman

Yes – but when you have to pay Trever Manual’s private legal expenses and settle the golden handshake for the CE who fought with the board, they need some fancy footwork to take from the clients

Looks like Mr G is me ??
Have exactly the same problems as him since the early 70’s.
Perhaps the rot started when they forgot they were a mutual company and started paying obscene amounts as golden handshakes……

Indeed – plus paying the chairman’s private legal expenses – which started the war with the CE – who was hounded out for a large payoff

Good idea Addriaan, Mr G should pay more fees to another financial advisor. No blame here, “he also made changes to the underlying funds in his RA.” Note Mr G made the changes to the underlying funds, no financial advisors from Old Mutual had given him this advice, yet he has paid R37 016.77 in fees.

Adriaan why didn’t you compare what would have happened if Mr G had invested in the same amount in the same funds over the same time period on his own platform vs the returns from his Old Mutual RA. If you had done that, we the readers, could easily see if Old Mutual created value or not.

Oh by the way there wouldn’t be penalties of R49000.

Well I have an article from about 1999 that says and I QUOTE
“AS SOON AS YOU SIGN UP FOR YOUR INVESTMENT YOUR BROKER IS PAID HIS 1ST YEARS COMMISSION IN FULL.THE LIFE COMPANY FACILITATES THIS BY CREATING A DEBTOR ACCOUNT IN YOUR NAME IN ITS BOOK AND YOU ARE CHARGED INTEREST ON YOUR LOAN AT MARKET RATES.” Yes a loan. Ever heard “The surrender value begins after the 2nd or 3rd year? Guess what they really said. We have been teaching this for 25 years. It’s kept well hidden.

My wife had Rainmaker and an Allan Grey at Nedbank. The ‘advisor’ then left and a Old Mutual ‘advisor’ came in. He advised her to drop both and take other unit trusts offered by OM . He showed her that Allan Grey had negative growth for the last 3 months. All unit trusts had negative growth at that stage. He invested her money with OM and charged her R12 000.00 in advisor fees. Their was no financial reason to change funds.

Blerry sharks.

Then lodge a complaint.

If there is no record of advice which outlines a replacement in the strategy, or if she has increased or decreased her risk, then there is cause for a complaint.

There of course needs to be an economic loss for a complaint.

“Meanwhile, he should probably seek more advice from a financial advisor.”

And get done in again….

Shocking!!!

In addition took me 5 months to get a tax certificate from them. Cant get hold of anybody. Working from home!!

Useless!!

Reaching Old Mutual is near impossible. And when you reach their call centre staff, they have no clue who to transfer you to. So glad I moved from them

Mr G should be grateful that a company as prestigious as Old Mutual is losing his money.

David you brute you! Lol.

They are gonna offer him another product that is tailor made for his profile. In for another wash he goes.

Keep it going folks, round and round we go and the OMU share price goes up and up.

Keep it up folks

Should Mr G decide to stay with these crooks, he only has himself to blame. These figures and exit fees is daylight robbery. Amazing how they structure the RA to benefit only themselves instead of the client who is paying extremely high fees. Fees for what? NEgative growth. Old Mutual must be ashamed… but this will be water on a duck’s back for them

I kid you not, that is the OM attitude.

Same old story same old mutual. Bloodsuckers.

I suppose there are more people who cannot read numbers than those that can, a bit like the ANC, they have 30 million purposefully uneducated as voting fodder.

Well balanced article Adriaan. I also wonder – in terms of investor psychology – how much Mr. G would have had in retirement savings today had the Advisor not sold him the policy 16 years ago? I note that he did not initiate the contract of his own doing. Albeit at legacy fees, the Advisor still did put him in a better position.

I think it’s fair to assume he would’ve saved something seeing as he took out this policy at all.

Whenever I hear OM I think of the song : Road to nowhere…

Well yes and no. In a sense many SA companies are fantastic vehicles to enrich the executives; screw the share and policy holders. A bit like a pale Eskom using policy holders’ money rather than taxpayers. Oh, and OM does turn a modest profit or reasonable return now and then. Can’t have the rank and file benefitting too much now can we?

Ha, So true.. I cringe when I hear their name or see their logo

Good article and I had the same complaints about Old Mutual and eventually left them. They are only interested in selling policies and making commission and give poor advice, resulting in very low returns.

I think it’s about time I left them too. Iam missing out on other opportunities.

Agree. I went over to Discovery and it is day and night. They actually have the cliet’s best interest in mind with extremely low fees. Make the move before its too late.

Discovery, Sanlam, Liberty all do the same thing with the same poor legacy products. Even if they offer alternatives, the sales people earn their money selling high comission policies with fee structures up to 6 or 7% – although you wont see that on their marketing brochures.

Frankly I am surprised MW has let Voetsak Old Mutual comment as freely as he has on this thread… clearly a Discovery sales person.

Anyway don’t take my word for it – educate yourself and look very closely at the documents you sign. Ask for EAC, check if you get penalised for changing your contributions or wanting to move after a while…. simple stuff.

Oh yes and check out Hello Peter for some indication if nothing else…
https://www.hellopeter.com/discovery-invest

Discovery? This is just a new high fee taker on the block (you have to be on their whole ecosystem to get any benefit), just use a normal investment provider (managed or index) without any fancy and complex products. Just a RA wrapper investing in normal Balanced Fund unit trusts.

Just go with Sygnia, top quarter performance, easy to understand fees, no hidden fees, no additional fees, no exit fees either.

It begs the question why OM was sitting on under performing funds for up to 5 years instead of moving the money to other funds that perform better. Its the classic excuse of a lazy investment advisor: Oh, the markets in that sector was poor! So what did you do about it? Nothing!
Why do nothing? Because commission and fees are still collected regardless of performance. If a so-called investment advisor told me that today I would eject him from my home.
OM, Sanlam, Liblife etc are like the Titanic who cannot avoid the iceberg.There are more dynamic fund managers out there in the past 10 years, technology has enabled the smart investor to educate himself instead of being led by a lazy investment advisor.
If info in the form of business news channels was available 30 years I would NEVER invest in an RA again and rather due some due diligence and pick my own investment portfolio.
It is not rocket science.

“Meanwhile, he should probably seek more advice from a financial advisor.” Good idea – more fees and less available for retirement. I recently saw one and they advised re-allocation of most of my investments and all they wanted in exchange for this advice was what averages out at about 2% per annum. I wanted part of the investment in bonds to ensure a monthly income because of where I am at this stage of my life and because the press had reported that 10 year government bonds were yielding just under 10% (of course the money invested will probably be worthless after 10 years but in the interim I need money to live.) Their advice was to split it between 2 bond funds one of which gives an annual return of about 4% and the other about 7%. Less their fee of 2% gives 2% (so we split the return on investment 50:50 with no risk for them). This means that after inflation I will be earning a negative return of about 2% based on official inflation rate on that one and about 1% on the other. The official inflation rate is hopelessly optimistic. It is more like 10% for groceries. Bear in mind that their fee adds to the fee charged by the unit trust / collective investment scheme of also about 2%. It seems to me that the only thing that investment gurus are good for is to accumulate wealth for themselves while depriving you of a comfortable retirement.

Yes TB. Besides a general rule is you get more of something good. If you got bad financial advice what is the point of getting more of bad advice? Adriaan should have concurred and said “Mr G needs at least a new financial advisor” if he wanted to honour his colleagues and their predatory profession.

the issue of outrageous,never ending fees charged by all these companies needs to be properly nailed down by legislation once and for all.How difficult to legislate against? If govt wants to wrestle with a populist hot button issue, this is it.

The only guaranteed thing on signing the OM contract were the fees to OM and the adviser (hence the penalty fees if cancelled). Additionally these fees are on top of the fees charged by the underlying fund managers (Allan Gray, etc). Performance, good or bad, would be affected by 3 layers of fees. Going direct to a low cost tracker (Sygnia, etc) guarantees lower costs (but not performance, which advisers sell you on, but under no circumstances guarantee, unlike their fees)

I realised at age 40 that my RA’s with Sanlam and Old Mutual, all with an annual 10% premium increase, were, to put it mildly, a massive State sanctioned Ponzi scheme. I continued to pay the premiums, but commenced investing an equal monthly sum, Rand for Rand, in unit trusts spread between Allan Gray and Investec, now NinetyOne – but with no financial “advisor” cashing in on the side. At age 55 when my RA’s matured, the value of my own investments, after only 15 years, was already very substantially more than the maturity values of my RA’s, the full value of which I then invested in a living annuity with, and managed by, PSG, withdrawing the minimum of 2.5%, which I reinvested in my unit trusts. (And I should add that the PSG management and financial advice fees taken for “canned” generic financial advice and automated computer generated tables and data in glossy brochures basically equals my drawdown, pushing the real, total drawdown over the cautionary 4% standard!). Over the past 15 years I have moved 60% plus of my unit trust investments into direct and indirect overseas funds, also held by Allan Gray and NinetyOne. Needless to say, at retirement at 65 the value of my PSG living annuities is a pittance compared to the total value of my own investments. And do not sermonise about tax savings on RA’s – I paid tax at the maximum rate for just over 35 years and the total effect of the tax deductible for annuities on my disposable income was really not that spectacular. And today I have, of course, very little concern about the State’s intentions to pilfer pensions and annuities with all manner of contrived thieving schemes to fund politicians’ corrupt activities; I can fairly ride out the continual decline of the Rand and the consequent rise in living costs; and even better, with an annual drawdown of 2.5% on my living annuities and less than 4% on my own investments, tax is really not a major concern. Of course the Van Geysen’s on the one side will bad-mouth the Heystek’s on the other, and both sides will spin all manner of tales with complexly convoluted statistics to mask reality, but somewhere between these poles you must find your own truth.

Brilliantly said!

What Mr. G should do is to convert from a “managed client” to a “direct client” and thus get rid of financial advisor fees.

He must then stop paying into the fund and get out of all OM products and into decent ETF’s that are available in the OM platform.

Personally I am past annuities due to the complicated cost structure. The so called tax benefit also means nothing when the fees simply strip away all the returns. Moral of the story, become a direct client and takr control of your financial destiny.

1) Anybody that still invest in policies and unit trusts are ill informed. Why pay people money for nothing? If you think about it, then you need to subtract inflation from the promised % as well, that is your real number.
2) Rather invest in blue chip companies on the JSE(not even Old Mutual) for proper returns and even dividends (twice a year)
3) Old Mutual is dead wood. Even the stock price is slower than a snail.

People be in charge of your own money.

Only use life companies for products that involve them taking on some life risk – i.e. life insurance and annuities. Deal direct for RAs.

Exactly what Magnus Heysteks been saying all along. People need to really call these funds out on their poor performance and fees.

I see myself fortunate in that I learnt this lesson at an early age.. Walk into the brokers office and look at photos of his boat and fishing expeditions – and realized his fees remains fixed and certain, my RoI [or lack thereof] can always be explained through a myriad of excuses.
Best decision I made was to get my funds out of their claws.
No, I’m by no means an investment guru and cannot boast millions in returns – but through taking control – starting with the basics of platforms available to me (TFSA, etc.), and building on that plus speculating & educating myself constantly – I have not done too badly. Very little in fee’s: school or otherwise. Plus I see my investments grow monthly.

People need to realise when you transfer Responsibility [control], you do not transfer the risk/loss element.
And only you get to live with the risk/loss consequence

Difficult to understand how someone can earn money and not educate themselves about investments. It’s your money so be responsible and read all the free info available on investing. Then you dont need an advisor and go direct.
Read hellopeter as well before investing with certain companies.
Voetsak_OM.

Exactly; who was it asked where the investors’ yachts were?

My RA experience exactly over the last 21 years, still have the policy for another 2 years until 55 then I am done with them. Don’t buy their story. Can get no where with them,never again OM. Tried a financial advisor, he then started teaming up with OM. Canned him as well.

Guys and girls, how much does a Financial advisor really know?
Read a script that his or her company told them to read to you?

I would stick to the ones with grey hairs and their ID number indicates they are over fifty years old.

There is so much to markets, you could lose money this week or month and then double it next year. It is all about knowledge how to read the environment.

Timing Timing!!!

Timing? That’s how people get burnt, you might come out on top, but someone else lost on the other side. Time in the market is the way to do it.

Bloody thieves. Not just the green snot company, but all of them, Allan gray included.

None of them are to be trusted.

Will never forget investing with Allan gray for over around 4 years and walking away with a negative return……. Little did I know that every time I went to visit for an update, that free coffee and sitting in there R15000 designer chairs was costing me around 100k in lost money each time I visited……
Found easy equities instead. Made 355 % in the first 12 months on sasol.

The only good thing these professional investment companies are good at is legally and unethicaly stealing yr money.

This investor can count himself lucky that he didn’t have any Old Mutual funds in his RA. His experience would have been much worse.
The Old Mutual Investor fund is a 4th quartile fund over 10,7,5 and 3 years. It has given ZERO return over 5 and 3 years yet, astonishing, it is recommended by finance journalist Stephen Cranston as a long-term investment in the latest edition of Investors Monthly.! I couldn’t believe my eyes when I saw that until I turned the page—a full-page advert from Old Mutual!
That’s how the media and these big investment companies roll! We will advertise if you don’t write nasty things about us.
Kudo’s to MW to publish this article in all its brutal horror.

I’ve taken a lot of flack (still am) over the past years over my views on RA’s and Reg 28. Reg 28 coupled with the poor performance of the JSE, the good performance over the past year notwithstanding, plus very high charges have created a generation of savers who have very little to show for their efforts.
In real terms, their retirement capital has not grown by a cent and it is now showing.The whole idea of putting away money over the medium to long-term is for investors to experience compounding growth in real terms.
I maintain that Reg 28 is a convenient and cozy arrangement between government (with its socialistic objectives) and the asset management industry at the cost to the client.
I repeat what I have been saying for many years–if you turn 55 you should seriously consider cashing out your RA, take the tax-free money and get the balance into a low-cost unregulated global portfolio.

But Magnus, people are discussing Old Mutual investments and not Regulation 28

Regulation 28 has a direct impact on the entire retirement industry, not just OM funds.

If you think returns are shocking now, wait till the ANC forces your retirement funds to be invested in their failed SOEs!

We will continue to teach everyone to get every cent of capital out of this country; the ANC have a track record;THEY ARE NOT TO BE TRUSTED!

Anyone not hearing the message from Magnus & others on this, trepidation will be their daily morning coffee.

Ag nee man, ouens bye some more.

Koop n bietjie meer, moenie so sour wees nie.

*Ek koop net SSW … Sibanye ne, check hom uit

Asked Alex Forbes to remove my fund manager as I get no value from fund let alone the fund manager. Their response is they can oblige but will have to charge me more. Effectively confirming fund managers are worth negative value. I don’t think they understood what they implied and I’m still a hostage. Last week got a sorry state of local stock market as excuse for fund performance. Then went online a see the top40 did 30%. Can’t wait for 55.

Almost a year (349 days) since OM LA cashed in.
On the exact same funds to date:
OM Returns on the LA: -6%!
Our Novice Investor Returns: +600%!

These Money Powers will fall once Investors discover they can do better by a country mile with very simple asset allocations.

I have to give Allan Gray a shoutout here. Their Equity fund only charged 0.35% TIC for the last year due to the fund underperforming their benchmark which in itself is also quite fair (average of all SA equity funds). Thus, they share completely in the performance of their clients. For this fact alone I will continue investing with them!

I don’t see it mentioned in the article and not in the comments so far as I can see…. what is the EAC – Effective Annual Cost on Mr G’s statement?

This was the standard introduced to curb hidden fees and allow people to understand their fee structures more clearly. It has been abused massively and not always easy to understand but it deserves at least a mention in the question or response above.

Even when you engage with these companies you get incomplete reponses and in some cases even blantant mistruths.

However the EAC should break out the costs in term of Investment Management Fee, Advice Fee, Admin Fee and then a component called “other”.

If there is a big number under other then you need to start investigating futher ASAP. Also Mr G is now 16 years into his nightmare so the EAC would probably been even scarier in the earlier years.

Many in the comments section have raised the issue that all Life companies sell these poor products to this day. Here is one justifying the fees and claiming they were disclosed…… this does not make a difference beacuse the end outcome is still incredibly poor. It does illustrate however that they have no intention of stopping selling these poor legacy products any time soon.

And for all those bashing all advisors you need to educate yourself a little and get beyond the big brand names who’s have been identified as employing product pushers who are measured solely on selling expensive high commission earning products…. there has to come a time when people take some responsibiliy for purchasing the same rubbish they have been warned against for the last 20 years….

Having realised that I was losing so a lot of value with all the fees taken from my compulsory pension fund contributions I committed myself to manage my portfolio myself and have never looked back. I now trade using a broker who do not charge any management fees, overnight fees, etc. They charge only through the spread and this I can calculate with 100% accuracy even before I open a position.

I am no fan of high fees. But people need to look at those fees BEFORE they invest, not 16 years later.

You only have yourselves to blame. These insurance companies are known rip-offs. If you didn’t know it 16 year ago, you would have been hiding under a rock.

Get rid of the financial advisor. 99% they don’t deserve their fees. Only consult one if you are unsure about something e.g. tax implications.

Invest with Sygnia or 10X investments! Much lower fees for the same exposure!

My approach (and advice) is to buy shares in Old Mutual, Liberty Life, etc., not take out policies with these companies. The dividends flow automatically as all these companies know how to scam the policy holders. Sad, immoral but true.

Having worked at a well known insurance company myself in my previous career, I had insights into their exuberant policy fee structure. A life insurance company is the worst place to save for retirement. Much better saving in a unit trust RA directly at one of well known fund manager companies. I would make the RA policy paid-up (to prevent huge withdrawal penalties) and save the monthly premium directly in a balanced unit trust fund as a direct investor (no advisor fees). Fees will kill your retirement dream!

I’ve always found Old Mutual to be a particularly underhanded employer. Though not unlike its financial services peers.

I’m still waiting for justification for the existence of these corporate “investment” behemoths that milk millions of people for billions in fees each month whether they give you any returns or not.

No investment house has consistently beaten the returns from my own investment management and decisions over the past 15 years.

Literally not even one.

Stay well away from investment management companies, investment “advisors” and life insurance companies. ALL of these will rip you off. They’re not there for your benefit, but for their own benefit – how obvious is that? Their only source of income is you.

investment advisors and such middlemen and middle-companies are a (very expensive) tax on any and all who cannot (or do not) manage their own financial affairs.

Old Mutual needs to explain the loss of a number of highly experienced White investment professionals from OMIG. It is disturbing to see such experienced people leave the investment team. What gives?

Who cares if the cat is black or white, as long as it catches mice? Refer above mw comment to the longer term poor track record of the flagship old mutual investors fund. While some institutional knowledge has left with staff, the evidence points to poor investment track records over extended time periods. Much dead wood needed to be cleared away and many confusing products.

Who cares? Many would care if it was a procession of Black investment professionals leaving OMIG. So why not the other way around? So in your view, the whites that are leaving are deadwood?

AlapThando Your grandmother hasn’t ‘liked’ your comment yet, please remind her.

Best thing I ever did was cancel ALL policies/insurances/investments I had with Discovery and Stanlib.

Worked out (when adding all the hidden fees) Discovery was actually charging me around 6% in fees… Emailed them and ended up with 1 of their actuaries trying to justify this to me & couldn’t.

Total f*** joke!

Best thing you can do is educate yourself. Read. Learn about finance, then invest yourself.

Doing just fine on my own and with investments (for e.g.) in Vanguard funds at 0.28% in fees I’m getting the returns for myself – not these crook advisors and investment firms.

Did Old Mutual, Liberty Life OR Sanlam make anyone wealth at anytime NO But under-educated people keep buying their B S

They have made themselves very wealthy yes.

Gobodo and Naledi could not cut the mustard at …Afena. Who? I’m not sure either of these guys is South African-born – so much for transformation. They are so out of their depth it is a giggle.

Never buy the products of an insurance company, (if you must) buy their shares.

Sorry to say this investor is wrong in his assumption. The Tax benefit from contributing R400 000 into an RA, assuming a marginal tax rate off 30% would be R120 000 (30% off R400 000), as we don’t actually know the marginal tax rate its assumed. That R120 000 was probably spent by the client, and if saved it could have earned additional interest. RAs are expensive but do a proper calculation and they are still the best investment out there. If you don’t blow the tax money but rather add it to the RA.

Just not a life insurer RA, but a unit trust RA, preferably an index fund one at that.

I really hope there are younger readers taking note of the comments here. I woke up at age 44 (I’m an old man now) when I saw my “Man van Sanlam” drive around town in a spanking new E class Benz .. I had a secondhand Mazda B1600 with shot piston rings at the time…. spending as much on oil as on petrol. There I was investing my capital at my risk working my guts out day and night and he was driving an expensive new car. I gave my head a thorough shake and dumped them all and then worked really hard at educating myself. I read everything I could lay my hands on on finance and money …. it took forever but it worked.

It’s what happens when you invest with a Life Insurer, use them for Life Insurance. Investments should be with an Investments Provider.

High fees are a problem.

Sure, this RA was taken out in 2005, less choice back then, less information on the internet, and satan-spawned life policy RAs were a much bigger money making racket by Life Insurers, but even managed funds like Coronation would have been much better for this guy, but they don’t have a force of sales people out there spreading satan-spawned life policy RAs.

I must unfortunately agree that Old Mutual gets more than their fair share in fees from my investment too. They should implement a policy in which their fees are related to the performance above inflation.

End of comments.

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