FINANCIAL PLANNING – 10 SEPTEMBER 2018 – MARTIN HESSE – OPINION: WORDS ON WEALTH
SAIFAA did not write the below article. The original can be found above.
What strikes me about commercial activity in South Africa is that it is predominantly focused on the young. The clothing and entertainment industries, in particular, seem oblivious to the needs of older people.
This is even true in areas where older people are relatively high in number. For years, the cinemas in Fish Hoek, Western Cape, showed movies that were singularly inappropriate for the area’s large aged population. Maybe that’s why there are no cinemas in the town today.
According to Statistics SA’s 2016 Community Survey, about 8.8 million South Africans were aged 50 or over. That’s 15.8%. In the 2011 census, the proportion was 15.6%, and in the 2001 census, it was 13.8%.
This trend of an ageing population is much more dramatic in developed countries: in the US, in 2014, over-50s made up just over 34% of the population, and in the UK in 2016, the over-50 figure is 36.6%.
In those countries, their sheer numbers make older people difficult to ignore for businessmen, and the buying power of this group, many of whom have built up sizable assets over their lives, is considerable.
Here in South Africa, perhaps 15.8% is not yet sufficient for a commercial shift to occur. I’m not talking about a huge shift, but enough of one to genuinely begin recognising and catering for the needs of people who are in the latter part of their careers (and often in senior positions) and, of course, those in retirement.
The financial service industry has a somewhat nonchalant attitude towards older people.
There are products for pensioners, such as higher-interest-rate or reduced-fee bank accounts, and some short-term insurers offer special insurance packages. But you often have to dig to find these products; they don’t feature in advertising campaigns, for example, where you are likely to see pictures of young families.
In the investment space, the focus is on people accumulating wealth – here’s where the profits lie for the investment houses. Once you retire, you are living off your investments, so you are “disinvesting”. Not much interest there. Have you ever seen a newspaper ad for a living annuity? No? Neither have I.
Why are the big financial service providers so subdued when it comes to their post-retirement investment products, such as living and guaranteed annuities? Why, for example, are the rates offered on guaranteed annuities not more widely publicised? This could stimulate competition among providers, to the consumer’s advantage.
The only way you find out about post-retirement financial products is through financial advisers (and, hopefully, by reading Personal Finance and similar publications). And that’s where the problem lies, because financial advisers are also more interested in investors than in disinvestors.
It doesn’t help that in the past there have been rip-off artists operating under the guise of financial advisers who have gone after pensioners for their life savings.
One person who is working to change attitudes towards the aged and coach advisers in how better to service their older clients is Derek Smorenburg, a retirement fund industry veteran and founder of the South African Independent Financial Advisors Association (Saifaa).
Smorenburg believes that financial advisers should be far more in touch with the needs of retired people and the expenses associated with ageing, and that there should be specialist courses offered in South Africa, as there are in the US, on financial advice during the disinvestment or “decumulation” phase of our lives.
If you have had a long relationship with a financial adviser, that adviser – if he or she is worth his or her salt – will have come to know you and your family almost intimately. And if your adviser has held your hand through your wealth accumulation phase, he or she should be in a position to advise you correctly once you retire, putting you into appropriate “decumulation” products and taking into account a very different financial situation from the one you were in during your working life.
For example, did you know that your medical scheme will probably not cover you for most expenses associated with dementia or for the costs of frail care?
Saifaa is hosting a workshop this month that deals specifically with how financial advisers can better meet the needs of their retired and soon-to-be-retired clients. It includes talks by experts on, among other things, the incoming default regulations pertaining to retirement funds, the psychology of retirement, preparing clients for retirement, the limitations on powers of attorney in South Africa, and trends in the retirement accommodation industry.
The workshops take place on September 13 in Umhlange, KwaZulu-Natal; September 14 in Sandton, Gauteng; and September 20 in Bellville, Western Cape.
Saifaa members pay R500 for the day-long programme, which includes a light lunch. Advisers and professionals in the retirement industry who are not Saifaa members pay R1000.