Nescience…the retirement antagonist
Mayuri Reddy, Market Strategist at Sanlam Employee Benefits Investments
The Oxford Dictionary defines the word nescience as lacking knowledge or being ignorant. Nescient is the application of nesscience: the politician entered into the National Assembly with some equally nescient companions.
With the English lesson over, we need to define how this applies to retirement. In the past, we would talk about retirement saving and refer to a situation where your clients were unaware of the pressing need to save more towards their retirement.
Nescience is a strong word that implies a certain measure of purpose associated with the lack of knowledge; almost like a head-in-the-sand approach to something. This is something that Sanlam believes is threatening to take over the market.
Message disconnect
Viresh Maharaj, Chief Marketing Actuary Sanlam Employee Benefits came across this word a few weeks ago and thought it encapsulated what many clients face when it comes to retirement planning and provision.
“It’s more than just an unawareness or lack of knowledge; it speaks to an element of disregard, of ignorance due to the concepts being unfamiliar and difficult to engage with and also a sense of bewilderment,” says Maharaj.
How much is this nescience influenced by external messages? Mayuri Reddy, Market Strategist at Sanlam Employee Benefits Investments, says that some of the contributing factors to this nescience include:
- Lack of information - something which seems simple but has a large impact on awareness and ease of engagement;
- Insufficient understanding - showing how - even if people do have information, they may not know how to interpret this info; and
- Lack of prudence where clients may not have the foresight to make positive decisions for their retirement outcomes.
"Together these speak to the retirement nescience Maharaj alluded to earlier. Too often, members roll the dice on their retirement savings," says Reddy.
Lack of information
If this really is an issue in the industry, it is a frightening thought. But how does Maharaj and Reddy come to the conclusion that there is a lack of information in the industry? Recent research within the 2016 Sanlam Benchmark Research, which will be released in full on 3 May, shows that 23% of all retirees surveyed are only aware of the value of their funds at retirement.
But then on the other end of the scale, the Sanlam research also shows that 25% of clients that were surveyed knew about the value of their retirement fund more than five years before retirement date.
There is not much in it when it comes to knowing too late and knowing soon enough to effect changes. This doesn’t point to strongly towards nescience. However, it does possibly point to the growing impact of direct insurers. Maharaj points out that many younger clients are engaging with direct companies through online platforms, and without regular input from advisers, there will be a lack of information.
Growing uncertainty
It’s from this lack of information that Reddy says the lack of understanding develops. “We saw from specific focus groups that younger members prefer to do their own research on products and only use advisors to execute their decision or provide comparative documents. Most are not interested in comprehensive financial planning,” says Reddy.
This then speaks to the lack of understanding of implications on client’s overall financial plans.
She adds that not only is there a gap in how people perceive the quantum of their retirement savings, but there also seems to be a planning gap. According to the Sanlam research, one in five retirees said they received financial advice for the first time only at the point of retirement.
“We also see the trend of reliance on the employer or the company’s human resource (HR) department persisting. Almost half of the retirees turned to HR for advice. And the number of clients using a personal financial adviser / broker is marginally higher among the more affluent retirees,” says Maharaj.
Editor’s Thoughts:
It is important to remember that the research done by Sanlam is not reflective of every single person in the country, but it does pose an interesting question. Is nescience a challenge in the industry? How do we work to overcome it? Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
