Sound advice can boost your pension by 23 percent
A financial planner could enhance your retirement income by as much as 23 percent, an investment consultant told a conference in Cape Town recently.
Robin Johnson, an investment consultant at Morningstar’s investment management division in Europe, presented the findings of Morningstar’s research into the ways in which a financial adviser can add value to your portfolio. The financial services industry calls this value “gamma”.
The industry uses other letters of the Greek alphabet to refer to the returns you earn from the market (beta) and the returns above the market that a skilled asset manager can deliver (alpha).
Johnson says Morningstar has concluded that you can enhance your savings by 1.5 percent a year, resulting after three years in 23 percent more income at retirement, by implementing just five of the financial planning-derived practices that the company has determined can add gamma. These five practices are:
◆ Ensuring that your earning capacity and your investments are aligned;
◆ Finding the optimal way to withdraw an income from your investments;
◆ Reducing risk by making sure that your investments are matched to your liabilities (such as your pension);
◆ Allocating your retirement savings to the appropriate annuity; and
◆ Ensuring that asset allocation and withdrawals are tax-efficient.
Next week is Financial Planning Week – the ideal time for you to seize the initiative and put your financial house in order, or to help someone else do so.
More than 100 financial planners who hold the Certified Financial Planner (CFP) accreditation will offer free financial planning consultations to consumers next week to make you aware of how financial planning can change your life.
Financial Planning Week is an initiative of the Financial Planning Institute (FPI), the body for professional financial planners who hold the CFP qualification.
Barry O’Mahony is an independent financial planner with Veritas Wealth Management and the winner of this year’s Financial Planner of the Year Award, which is jointly sponsored by the FPI and Personal Finance.
O’Mahony says that financially savvy people harness the power of compound interest to work for them, not against them, by setting up a debit order for their savings. He says they also use financial planners to help them to get done what needs to be done.
If you are not sure what financial planning can do for you, now is your opportunity to try it out for free. Many financial planners will open their practices for free consultations and some will give free talks next week. Some planners with the CFP qualification have volunteered to run free financial literacy clinics on an ongoing basis for groups, such as employees, trade unions or churches. The FPI has developed a programme which its members will present to your group on request.
For more information about Financial Planning Week, phone 011 470 6013 or visit www.financialplanningweek.co.za. Members of the financial services industry who want to volunteer their services during the week should email email@example.com
To give you an idea of what a financial planner can do for you, we asked the three finalists in this year’s Financial Planner of the Year competition about their approach to financial planning.