South Africans rely on family and friends for financial advice, survey finds
Twenty-seven percent of South Africans regard their family, friends and colleagues as the most valued channel for personal financial advice....
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Twenty-seven percent of South Africans regard their family, friends and colleagues as the most valued channel for personal financial advice.
This is according to the latest FNB Retirement Survey, which captures the viewpoints of more than 1 000 people across age groups, including retirees.
The research delves into various aspects of the retirement sphere, including the different sources of advice people consult for their finances.
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These are social circles (family, friends, colleagues), online media (like Google), banks, social media, investment companies, financial planners, newspapers and magazines, human resources at employers, insurance brokers, and retirement fund consultants.
Source of financial advice
On the question of which source of advice they trust the most, the majority of respondents indicate the advice given by friends, family, and colleagues. This is followed by banks and financial planners.
“When examining the personalisation of advice, social circles emerge as the most valued channel, likely due to the familiarity and personal trust inherent in these relationships,” says Lytania Johnson, CEO at FNB Personal Segment.
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“It is a somewhat concerning statistic given the untested nature of financial and retirement advice often provided by friends and families.”
The appeal of social circle advice is that it is highly personal and comes from a deep understanding of the person and their circumstances. Professional advice can only achieve higher uptake if it takes the same approach, according to Johnson.
Retirement advice lacking
This year’s survey reveals that although people generally acknowledge the significance of seeking advice before making financial or investment decisions, it is not so regularly relied upon when it comes to retirement.
This is reflected in the fact that 48% of respondents in the survey say they have no retirement plan in place.
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Of that 48%, more than half say they cannot afford a retirement plan due to other financial priorities.
The survey also shows that financial institutions are not fully meeting consumers’ retirement needs. Across the market, retirement-specific services achieve the lowest satisfaction scores relative to other experience elements.
Learn from the best in the world
Samukelo Zwane, product head at FNB Wealth and Investments, says South Africa could learn from global retirement systems that are deemed the most robust and successful in the world.
“While no two countries are identical and no single retirement system is perfect, there are universal truths and lessons that we can glean from those nations considered most successful in providing for their retirees,” he notes.
The annual Mercer CFA Institute Global Pension Index evaluates retirement income systems according to three sub-indices, focusing on adequacy, sustainability, and integrity.
The 2023 findings include the results from 47 countries. In the latest index, the Netherlands, Iceland and Denmark top the rankings.
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South Africa ranks 38th out of 47 and scores below average for adequacy (44.2) and sustainability (49.1), but higher on integrity (76.6).
Areas of improvement
According to the Mercer index, South Africa’s retirement system could improve by:
- Increasing the minimum level of support for the poorest, aged individuals;
- Raising the coverage of employees in occupational pension schemes;
- Introducing a minimum level of mandatory contributions into a retirement savings fund; and
- Introducing preservation requirements such as restricting members from withdrawing funds from occupational pension funds before retirement.
Zwane says that with the recent introduction of the two-pot system (allowing retirement fund members access to a third of their funds while compelling them to preserve two-thirds until retirement), South Africa’s ranking in the Mercer index will hopefully improve.
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“Compulsory participation in occupational pension schemes and minimum contributions in retirement savings will better our ranking further,” he adds.
Currently, there is no legal requirement to compel companies to have an occupational pension scheme for their workers.
“One of the ways to address this is to make setting up an occupational pension scheme mandatory,” says Zwane.
However, this could be expensive for smaller companies which would require them to participate in umbrella funds.
This article was republished from Moneyweb. Read the original here
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