The Oxford dictionary describes resilience as the capacity to recover quickly from difficulties. It implies an inherent toughness that most humans possess in abundance. In a world where clients are under financial pressure, what is their financial resilience? Are they planning adequately for their future? Does their financial horizon extend towards retirement? These were some of the questions that were asked at the 2019 Sanlam Benchmark Survey.
A whole new world
Barend le Grange, Head: Individual Member Support at Sanlam, pointed out that a good way to motivate clients to save towards retirement is to approach the subject from a different angle.
“Retirement is not a product that we sell, it is a lifestyle that we need to help our clients plan for. We need to instil financial resilience into our clients’ lives so that they can take on life’s challenges. The fact that most South Africans cannot afford to face one financial setback in their life is troublesome news. We need to change this, help clients work towards the life that they aspire to live,” said Le Grange.
Actual lived experience
Most advisers have a good relationship with their clients and work hard every day to help these clients manage their risk.
However, the reality is that there are still several clients in the industry who are reluctant to save towards retirement because of an actual lived experience that they have witnessed within their family or among friends.
“There is some disappointment in the industry where clients have a bad experience with an adviser, product providers and are at times disappointed with themselves regarding decisions made along the retirement journey. There is a lot of shock at the tax implications once they reach retirement and the net outcomes that those close to them experienced has left a lot of unanswered questions about the value of retirement,” said Le Grange who added that this leads to significant levels of regret about the whole journey.
Information is a problem
Le Grange pointed out that if the industry is going to get serious about promoting financial resilience and improving retirement outcomes, a few key challenges need to be addressed.
According to Le Grange, the first challenge that needs to be addressed is that clients feel that there is insufficient information that is being provided to them by retirement funds and advisers. Whether this is a fair criticism of the industry is debateable. TCF states that clients must always be well informed and that any planning for retirement needs to be done off the back of a financial needs analysis. There is sufficient information in the industry that prepares clients for the retirement journey.
“When there is information, the most common criticism is that there is a lot of jargon in a policy. Certain clients feel that the only time that they are aware of this jargon is when they receive a benefit funds statement and that they are often clueless when reading it,” said Le Grange.
This leads to the fact that these clients feel isolated within their funds and at times feel lost or disorientated.
What clients want
Often, advisers are not aware about what clients want out of their retirement journey. In fact, solving this equation is seen as the Holy Grail for many insurers.
“This is where Big Data plays a massive role in the industry. Data has shown Sanlam that clients want to use technology-based platforms to find out more about the insurers values and to conduct basic transactions like changing personal details. They then want to engage with advisers when it comes to information and guidance. Finally, they want to be assured that they will have access to trusted financial advice. This is how personalisation needs to take place,” said Le Grange.
He added that a significant change that does need to happen in the industry is that insurers need to rethink the value of written communication as clients feel that it is becoming ineffective when it comes to engagement and influencing behaviour.
The end of the line
In the past, retirement-based advice was provided to a client up until the day of retirement. Thereafter, clients were left to their own devices. A key change in this was when the Default Regulations stipulated that a company needs to provide Retirement Benefits Counselling following retirement.
However, the Default Regulations do not stipulate how this advice needs to take place. Le Grange points out that while 88% of respondents to a recent Sanlam Survey pointed out that Retirement Benefits Counselling will go a long way in improving retirement outcomes, there needs to be a standardised way in which this occurs which needs to be driven by value.
According to research done by Sanlam, when it comes to stand alone funds, 51% of the Retirement Benefits Counselling communication is written while 25% is provided by an employee benefits consultant.
There must be some value in written communication when it comes to Retirement Benefits Counselling or else the Financial Sector Conduct Authority (FSCA) would never have approved it. However, there is some value in Le Grange’s feelings that there needs to be a standardised approach which is driven by the client’s best interests.