“At least 40% of your clients and their spouses are either close to, or already within, the Decumulation Phase (retirement) of the Journey of Life.”
This is the message that SAIFFA founder, Derek Smorenburg, shared with financial advisers at a recent online meeting. But the problem this poses is by no means a new hurdle for financial advisers to help their clients navigate.
Around 2017, the majority of approximately half-a-million South Africa living annuitant clients, and their spouses, were forecast to run out of their investment capital before the last dying survivor.
Over R300 Billion was invested in 410 898 Living Annuities. Most did not receive suitable advice, chose inappropriate products and had not received annual reviews.
It is evident that many clients (and advisers) are not fully aware of the multiple products and services that could be considered for both the accumulation and decumulation phases.
SAIFAA is undertaking to provide its members with decumulation tools. These tools will equip you through a series of webinars to advise and guide your clients through this complex financial transition and keep managing their life and financial planning through the decumulation stage.
Here’s a reminder of the two phases:
Accumulation Phase Clients
This is the slightly easier of the two phases. These clients are still economically engaged and generating an income. We ensure that our SAIFAA members are suitably equipped to provide the following accumulation advice and guidance to their clients:
- Advising them on how to manage their long term financial planning going forward after reviewing their current holistic investment situation post-Covid-19.
- Considering the possibilities of earning additional income post-retirement. What talents do they have at their disposal? Discuss the possibility of extending their retirement date and what you and your practice have planned for them during this journey. (i.e. 50+ Program)
- Talk about how their children and family are going to add value towards their journey ahead and what roles they will need to assume (see: Family Matters – Explaining an Estate Plan)
- Discussing the reality of current ageing parents and family, all of whom are part of this future challenging period. Including aspects such as the costs of frail care and retirement accommodation (see: Frail Care – The Cost of Comfortable Living)
Decumulation Phase Clients
This is a more problematic sector of our IFA members’ client base (between 25% to 60%). Many of them probably had up to a decade of flat-line returns on their living annuities before the impact of Covid-19, downgrades & offshore investment structures etc. all kicked in.
Many have not yet been forced to think of the choices that will soon become a reality. In this decumulation phase our members are provided the following guidance for their clients:
- Assess their current retirement investment capital structure including their residential situation.
- Analyse their current health status. This must include ailments and chronic impairments that will inform suitable ‘tools‘ that should be considered for the future.
- Discuss the costs of frail care and how that is going to be considered as part of current and future retirement accommodation challenges (see: Frail Care – The Cost of Comfortable Living)
- A review, if applicable, of their children’s situation from a financial support perspective (both locally and overseas)
- Discuss, from a Certified Post Retirement Practitioner [CPRP®] perspective, some of the human advisory guidance aspects that need to be considered. (i.e. compassion, sympathy and understanding)
- Share with them some of the products and services that our members will be learning about later this year (at the planned SAIFAA Post-Retirement Investment Planning ‘Tools’ Workshop) that could be considered for their family’s post-retirement journey ahead.
SAIFAA has launched a world-first Certified Post Retirement Practitioner [CPRP®] Designation Program. This program equips our members with the expertise to advise and guide clients and families towards a better understanding of the journey towards and beyond retirement.
You can find out more at https://saifaa.co.za/cprp.