The results are in—you can view them below—and there are some very worrying insights. The strongest, and most concerning, outcome of today’s ‘Making Choices’ poll is that an overwhelming 77% of participants do not have a clear idea of their retirement needs and 74% do not believe their savings plan is set to achieve their financial goals.
“If ever there was proof that initiatives like Financial Planning Week are needed to prompt action this is it,” comments Nick Cann, CEO of the IFP. “Financial Planning has to be taken far further than it has been to date—consumer education is crucial but access and engagement are just as important.”
Barry Horner, CEO of Paradigm Norton Financial Planning and President of the IFP, believes the financial services industry is partly to blame for this lack of action. “The poor image of financial advisers and investment companies must be partly to blame when we read the results of today’s survey, which show that so few individuals have any idea of how much they need to set aside in retirement.”
“The poor reputation that pensions and pension providers now have in the eyes of the general public have doubtless resulted in a lack of interest in the need to plan for the future,” Horner continues.
The IFP President says he can’t blame people for taking this view, particularly in the current environment when making ends meet is a daily struggle, but regardless of who is the blame, Horner believes the consequences of a failure to plan for the future will be severe and have significant consequences for governments and generations to come.
And he is not the only one. Stephen Willis, a Certified Financial Planner with Piercefield Asset Management, says today’s results are alarming. “If ever there is a stage in life when people need to get definite with their financial plans, it is during the period running up to retirement,” Willis comments, adding that the poll results suggest a large number of people are heading for financial disaster in retirement unless they start to take some action very soon.
Though many of today’s respondents may be older and wiser than those participating in previous polls, and are perhaps more understanding—and accommodating—of financial crises, they appear to be no better equipped for retirement than younger generations. “The transactional nature of financial advice in the past has not led to any deep level of education for this age group,” comments Dennis Hall, Chartered Financial Planner with Yellowtail Financial Planning, “and many will not know the true extent of their retirement shortfall or just how much it will take to get on track.”
Burying one’s head in the sand clearly isn’t the answer, Hall points out. Instead, he suggests that taking some financial planning advice could help steer a path toward a better future life than one might currently expect.
As we’ve seen with similar questions in the IFP survey and previous polls, the majority of people (54%, in this case) are not regularly reviewing their finances or their goals, which is particularly pertinent given that today’s theme is about ‘Making Choices’ and is aimed at those who may have found themselves recently free of dependents or perhaps heading towards retirement. Similarly, 59% believe it’s about time they gave their finances the once over, but are lacking the motivation to do so.
“Reviewing plans is crucial,” says Chartered Financial Planner Christine Morris of Informed Choice South West. “Over time people accumulate a number of different pensions, for example, and it could be that they have simply been left to languish in old style contracts and funds that are now inappropriate and do not match the risk and reward appetite of the investor.” This scenario certainly rings true for Morningstar’s Making Choices Case Study, which can be viewed here.
“If a review has identified that the fund is going to be insufficient to provide the desired level of income at pension age, the investor can at least then make choices,” Morris adds. For example, she suggests the investor could increase savings or contributions if there is surplus income, or perhaps invest capital more aggressively to achieve greater growth, or—if needs be—reassess and establish new goals.
Barry Horner also highlights rapid changes in legislation and taxation rules as other reasons why it is vital that an individual’s personal financial circumstances are reviewed on a regular basis. A review should be carried out at least once a year, Christine Morris advises, if not more often the close one gets to retirement.
One perhaps reassuring statistic to come out of today’s poll is that 59% believe their finances suitable organised as to enable a spouse or family member decipher them in their absence. However, this not only leaves 41% who, should disaster strike, could leave their family in financial turmoil, but Dennis Hall is also suspicious of the 59%.
“In my experience, fewer than this feel confident about finances if the main decision maker were to die,” Hall says. “It is one of the areas that we spend a lot of time working on, ensuring that the other partner knows enough to be able to cope if left alone.”
“By having a well thought out financial plan, which has considered what would happen in a catastrophe such as death or disability, people are able to get on with their lives without a nagging worry in the background,” Hall concludes, while pointing out that the services of a trusted adviser will take away a lot of the stress in such circumstances.
The overriding message that comes out of today’s poll is that much more needs to be done in raising awareness of the need for a different approach to investing, which is directly targeted towards helping individuals both articulate and achieve their broader life goals.
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