By Nicolette Dirk, finance writer, Justmoney.co.za
Financial advisors need to adopt a different strategy with pensioners, particularly if come across retirees that are forced to reduce income to survive.
This is according to financial advisor and author, Peter Larcombe(pictured).
Larcombe said investors need to play a far more active role in decision making and the financial services industry has to be less set in its views on how retirees should invest.
Larcombe added that people investing for retirement were overlooking some very basic principles that would enable them to move from being conservative investors, who avoid risk at all costs, to active participants achieving the same returns as other investors.
In his recently released book, Creative Investment Planning for South Africans, he outlined how retirees can draw from their investments during a period of market downturn or recession without losing capital and retaining the higher growth investments.
“The 21st century has introduced new challenges with globalisation, information technology and financial complexity. Many international financial institutions have exploited profit incentives for management and shareholders at the expense of investors and taxpayers.
These are practices that played a major role in the seriousness of the 2008/9 recession and eroded the credibility of the financial services industry as a whole,” said Larcombe.
What should financial advisors do?
He suggested that investments and portfolios be subject to reviews at half yearly intervals.
Larcombe added the industry needs to be more proactive in getting relevant information to assist investors with their decision making. They also need to thoroughly explain what the risks and returns are of investments and how different sectors are affected to investors.
“Financial advisors, who may not be investment specialists or proficient enough, need to identify when to call for extra professional assistance from within their management teams.
The large financial institutions have the technical knowledge within their companies and should disseminate it on a regular basis so that those financial advisors who are not investment specialists are proficient enough to offer the necessary level of service to meet their client’s needs. This feedback loop should be at least monthly with market conditions being so volatile,” said Larcombe.
The large financial institutions have the technical knowledge within their companies and should disseminate it on a regular basis so that those financial advisors who are not investment specialists are proficient enough to offer the necessary level of service to meet their client’s needs. This feedback loop should be at least monthly with market conditions being so volatile,” said Larcombe.
Investors need to step up
He added that investors themselves need to step up to the plate.
“Today we live in a dynamic world where technology and globalisation is advancing at an incredible rate. South Africa has the added dimension of a higher inflation percentage than the developed world has.,” said Larcombe.
He added that it is prudent for retirees to adopt a more active investment management practice, especially in South Africa.
“Retirees would do well to insist on regular reviews with their financial adviser or when there has been a significant movement in economic or market conditions, when worldwide or local events such as changes in the bank rate or major stock exchange values or recession could trigger uncertainty leading to increased risk and potential loss or reduction in asset values,” said Larcombe.