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Lockdown reminds financial planners of their clients’ non-financial portfolios

18 August 2020 Gareth Stokes

The pandemic, ensuing national lockdown, and financial market fallout created a perfect storm during which your clients will have questioned every aspect of their financial portfolios. Periods of extreme crisis also serve to remind South Africa’s financial planners that a financial portfolio is only one of four pillars that need to be in place for a secure and successful retirement. This truth emerged during a presentation titled ‘The Psychology of Retirement’, delivered by Dr Hannetjie Van Zyl-Edeling, counselling psychologist, speaker and author, at the South African Independent Financial Advisors Association (SAIFAA) CPRP® webinar.

Asset allocation to positive psychology

CPRP® is an acronym for the Certified Post Retirement Practitioner Programme, aimed at upskilling CFPs® and financial advisers to assist their clients during retirement. Dr Van Zyl-Edeling encouraged financial planners to use the pandemic as an opportunity to engage with their clients on the issue of non-financial portfolios, which include health, psychological, and social portfolios. A quote from Robert Laura, best-selling author and nationally syndicated columnist for Forbes.com and Financial Advisor Magazine, served as an anchor for the debate. He wrote: “Financial advisers should be teaching people about resilience and positive psychology instead of just asset allocation and stock market returns”. 

Financial advisers are increasingly aware that part of the financial planning challenge is to ensure their clients’ smooth transition from work life into retirement. And the best way to ensure a smooth journey is to avoid volatility. The remainder of her presentation focused on how to phase in changes in such a way as to reduce the impact of lifestyle inflection points in each of the non-financial portfolios. Your clients could, for example, phase in new hobbies or part time work in the five or 10 years preceding retirement. “Your clients could easily live for 35 years after their retirement date,” she said. “You must plan properly to help your clients achieve meaningful years in retirement and get full value from that time”. 

Understanding financial behaviours

The good news is that most financial advisers already dabble in the field of psychology, by influencing clients’ behaviours during times of market crisis and continuously motivating them to stick to their holistic financial plans. The question becomes how to expand this influence from the financial portfolio into other aspects of your client’s life? 

Dr Van Zyl-Edeling explained that South Africa’s lockdown offered some insights into the feeling of isolation that individuals experienced going into retirement. “We were suddenly cut off from many sources of our usual attention,” she said. “And we are seeing tremendously high stress levels as a result”. Those who work in high profile positions are at particular risk of anxiety, depression, and stress in a post-retirement world because they find themselves yanked out of an environment where they were the centre of attention, and perhaps central to the success or failure of a business that supported hundreds of families. 

Many individuals are turning to mindfulness as a foil for the anxiety, depression, and stress that often accompanies step-changes in their work and life balance. Wikipedia.org explains: “Mindfulness is the psychological process of purposely bringing your attention to experiences occurring in the present moment without judgment; you develop the process through the practice of meditation and other training”. Dr Van Zyl-Edeling expanded on the Wikipedia definition by commenting that mindfulness required an individual to be totally present in a situation, with full awareness of the here and now. 

Friends in need

The presentation briefly touched on the social portfolio, with the key takeaway being that clients tend to overlook this aspect of their lives, despite the obvious need to build relationships in both the individual and group context. There are countless studies that confirm the role of social support structures in ageing and longevity; and it is important that your clients consider how their social interactions will evolve as they enter retirement and beyond. Some considerations include distinguishing between close relationships with family and friends and the more informal relationships achieved by belonging to clubs or offered in the retirement village setting. 

Your clients’ health portfolios are in the spotlight more than ever due to its overlap with financial portfolios, with medical inflation posing a threat to the best-intentioned financial planning. Healthy lifestyles are increasingly being driven by your clients’ health and life insurance providers, who frequently attach wellness programmes to these benefits. They all repeat the same mantra for a healthy life, being exercise, diet, managing stress, and sleep. 

Objectives for non-financial portfolios

How can you help to navigate your clients to successful non-financial outcomes? “We must imagine the end point we are working towards as a light house; if you can see the end point then you can focus your efforts in that direction and avoid flailing about meaninglessly,” concluded Dr Van Zyl-Edeling. “The closer to the desired outcome your client is, the better and stronger the connection they will have to it”. The secret for a healthy and mindful retirement vests in lifelong learning, positive attitude, good nutrition, regular exercise, social support, and charity. 

Writer’s thoughts:
The fact that there are more than 700 million global citizens aged 65 years or older, combined with ongoing improvements in mortality rates, creates opportunities for financial advisers who specialise in post-retirement advice. Are South Africa’s financial advice professionals adequately skilled to assist pensioners, many of whom can look forward to three or more decades in retirement, with their financial planning needs? Please comment below, interact with us on Twitter at @fanews_online or email us your thoughts [email protected].

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