The much needed conversation
South Africans have the ability to be motivated into an action through well run public awareness campaigns. Through the effort of many companies, South Africans were educated on the need to create a savings culture within their daily lives during National Savings Month which happens during July every year.
One of the areas where this is especially pertinent is in the retirement industry. Statistics show that only between 3% and 10% of the population are able to retire comfortably. This is a frightening statistic, and one that PPS tells the FAnews needs to be resolved as a matter of urgency.
Meaningful conversations
One of the major ways in which we can take significant steps towards creating a better savings culture is to have meaningful discussions with clients and advisers, says PPS Executive: Business Development and Marketing, Nico Coetzee. He adds that in the current financial services environment, it is vital that advisers have these discussions with their clients and that they understand the information that they are being given.
“We cannot continue to work in an industry where clients are uneducated about the financial services industry. There is a need for clarity and honesty with every interaction. This way, clients can plan their retirement properly in order to achieve their goals,” says Coetzee.
Taking the bull by the horns
Coetzee adds that because this is a very important topic, one cannot simply sit back and wait for government to do all of the talking. Companies need to run their own initiatives in order to encourage this.
Coetzee points out that PPS the company focuses strongly on university graduates that have a post-graduate degree. He stresses that this is an important target market because creating an active savings culture among the youth is the start to building a brighter future.
“When it comes to Savings Month, we usually focus on two issues of importance every year. This year our focus is on investment returns and fees,” says Coetzee.
The importance of compound interest was highlighted last year, but this year, the understanding around returns, which are linked to underlying investments and not solely to the chosen retirement vehicle, has been a focal point.
“We believe that clients should not be putting all of their eggs into one basket but should rather embrace the diversified portfolios offered. This will also need to be used in conjunction with active and passive investment strategies,” says Coetzee.
Fees have become one of the most talked about issues of the financial services industry. With the new Treating Customers Fairly (TCF) legislation, Coetzee points out that companies need to be open and honest in their interactions with clients when it comes to fees. “Clients need to understand the pricing structure and they need to ask for full disclosure. If they do not ask for it, it should be given to them as this will then spell out exactly where both the client and the adviser stand. This fee needs to be competitive and not onerous whereby it will stand in the way of the client achieving their investment goals,” says Coetzee.
A view of the industry
When compared with the rest of the world, Coetzee points out that South Africans’ saving rate does not fare well. While these comparisons show how much room for improvement we need to embrace, we must be careful that we are comparing apples with apples.
“When drawing these comparisons, we do so against other countries including Brazil, Russia, India, China and South Africa. These are all developing nations which face similar challenges to South Africa, albeit on a larger scale, therefore we are comparing apples with apples. However, when we look at graduates, we would assume that they would have a similar level of savings education than those in the US and the UK,” concludes Coetzee.
