Retirement plan for every level
LONGEVITY: YOU COULD LIVE FOR ANOTHER 40 YEARS
If all your financial advisor is doing is giving you financial advice, they aren’t doing their job.
When it comes to the complex, stressful issue of retirement, the financial advisor role has shifted. For financial planning to have any meaning, it must be accompanied by a more thorough appreciation of what you intend doing with your life.
In general, most financial advice focuses on the build up to retirement and the actual moment at which a person stops working and must generate an income from what they’ve saved. It’s a goal that has been reached and little is done to address the many years that may follow.
Frank Richards, head of Momentum FundsAtWork, says this issue is compounded by people now living longer. People could live another 40 years, or more, after their official retirement date. Given that one only expects to work for around 40 years, this means there’s another entire investment journey individuals need to be guided along.
“Longevity really is one of the biggest challenges in the industry today,” Richards told the South African Independent Financial Advisors Association (SAIFAA) seminar. “The way in which we design investment products needs to be different.”
Deal with financial issues first
The financial choices in retirement are usually more complex than those made beforehand.
“From an investment perspective, you can build a portfolio that is appropriate for most people,” says Richards. “But when it comes to annuity strategies, people are very different. It’s more complicated to construct something to suit an individual profile.”
This is because most people haven’t saved enough, which inevitably means compromises must be made.
More than just money
Advisors should see this as far more than just a once-off decision; retirement is increasingly being understood as a process.
Psychologist Hannetjie Van Zyl-Edeling told the seminar that advisors must start thinking about retirement in a different way to really help their clients to not just adjust, but thrive once leaving full-time employment.
To help clients make good decisions, advisors need to look not just at what money is available, but how they’ll use it.
Planning on other levels
She says advisors must also consider the psychological, social and health ‘portfolios’.
“For many people, when they change from a full-time work situation to an absence of that, there is total loss of identity and meaning.
“We need to assist them in a long-term planning way, where they work on a new identity.”
A financial plan cannot happen in isolation without understanding what a client’s future life will look like.
“If you were shipwrecked and didn‘t know where the land was, it would be incredibly difficult to decide where to go. However, if you see the lighthouse, you can … focus on that place,” says Van Zyl-Edeling.