Honest conversations
We are all aware of the retirement industry in South Africa and the challenges that it faces. Added to the complex problem of South Africa not traditionally being a nation that is known for its savings, there are external challenges which are dissuading people from participating in the industry.
These issues were presented at the recently held Sanlam Benchmark Symposium where an open and honest discussion about the retirement industry was presented to the advisers in attendance.
A harsh reality
We all aspire to be the best version of ourselves every day and we want the same with our retirement saving. We want to save our money knowing that we will be able to enjoy what is supposed to be our golden years.
The reality is that most South Africans are unfortunately far from this goal. Dawie de Villiers, CEO Sanlam Employee Benefits, said that at the moment, people saving for retirement are seeing poor outcomes. “These poor outcomes are characterised by a general lack of understanding of the rules of funds, high costs, and a lack of clarity of what they are supposed to be doing to achieve their goals,” said De Villiers.
Strike one
One of the biggest contributors to the situation that clients find themselves in, according to De Villiers, is that costing structures in the industry are not suited to the current economic environment that the country finds itself in.
“When it is cheaper for a client to take out his retirement savings in cash when he should be purchasing an annuitized product, then we are faced with a problem. Processes within the industry need to be streamlined, they shouldn’t be a deterrent,” said De Villiers.
The other factor, which is in no way less of a challenge then cost structures, is that products within the industry are so complex that it takes an adviser days to sit and analyse the best option to present to their client. In a world where clients expect real time interaction, we need to ask if this is acceptable.
Strike two
According to De Villiers, the above has lead to significant distrust in the industry. The reality of the situation is that the public has a general distrust towards insurers and advisers. While we know that there are good advisers in the industry who can be trusted, there are some who are contributing to the distrust issue.
“The other factor complicating this is regulation. While regulation is needed, it needs to be designed for the purpose of making saving easier for clients. We have already discussed the plethora of rules that insurers use to administrate their funds, but we cannot walk around continuously pointing fingers at each other, we need to work towards improvement,” said De Villiers.
He also pleaded with the Financial Services Board (FSB), and government, to expedite the process of implementing the promised regulatory reform. “Let’s implement, let’s get it done, let’s move on,” said De Villiers.
Strike Three
While the above are industry challenges, we also need to look at why clients are getting poor outcomes from a personal point of view.
According to De Villiers, the first factor is that some members of the public don’t even want to save. When faced with a maze of complexity and convoluted options, they automatically go for the lowest contribution rate or follow a herd mentality where they take out the same product as a brother or sister because it is working for them.
However, saving is a personal thing. We all face our own challenges and cost pressures. No two families have the same budgets, which makes following a herd mentality so dangerous. This is also important why it is vital to sit with clients and reassess their situation on a regular basis. Therefore, contribution rates can be increased as they advance in their career or pay off debt.
A glimmer of hope
While the challenges that the industry faces are immense, there is a glimmer of hope at the end of the tunnel. De Villiers is encouraged by the rise of technology and the fact that he feels that it will keep the industry honest and force it to change.
“Clients are relying more and more on technology to educate themselves on products and know where they should be at a specific stage on their retirement journey. The fact that a client is able to have a dashboard in front of them which shows them the position that they are in is very encouraging. Let us see how we can make the journey to retirement a more positive one,” concluded De Villiers.
Editor’s Thoughts:
There is no doubt that we are faced with challenges when it comes to retirement. But it can be changed. To paraphrase the great Nelson Mandela: There is no such thing as impossible. It is just a matter of finding out how to get something done. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
