Caught in the advisors’ sights

HIGH FEES: PENSIONER CAN’T SEEM TO ESCAPE THEM

Riette Coetzee, financial planning consultant from Alexander Forbes, advises a reader who wants to know if he really needs a financial advisor.

Question: I will be going on pension at the end of this year at the age of 65. I have no debt and my home is paid for. I can’t escape exorbitant advice fees. I have my pension and a separate retirement annuity and about R2 million in cash which they all would love to invest for me. I feel they could invest my money to earn about 1.5% per annum more than I could, but since their fees will be 1%, it hardly makes it worth my while. I could take my R500 000 tax-free allowance from my pension and draw down the minimum of 2.5% on the rest. If I subsidise myself from my cash reserves, I can survive for the first six years of my retirement while still leaving the rest of my pension to grow. Would I be better off with a financial advisor?

Answer: Before you can decide what you want to do with your money, you need to know what you want to do with your retirement. Your financial plan is one component of a flexible life plan to last into your late 90s. If you manage your investments yourself, you need to set aside the time to monitor your portfolio and be disciplined to adjust to different market conditions.

You also have to keep your emotions in check when markets are volatile. These can prove challenging for anyone.

In addition to longevity risks, we live in very uncertain times. Getting the right financial advice is more important than ever. A professional advisor will help you set up different investment strategies to achieve certain financial goals and provide assistance and guidance with retirement and estate planning.

There’s much more to consider than saving 0.5% in fees. It is vital to ensure you’ve planned appropriately so your income suits your life expectancy. Financial planners can assist in reaching all these.

There are several options available for investing cash. A financial planner will help you to decide on the most tax-efficient option for investing and withdrawing. They will also consider different vehicles for different goals, and plan for liquidity in life and death. The cost benefit analysis has to take all this into consideration, not just a few tenths of a percent.

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