19 June 2012

Advice – it makes all the difference

The FSC release on retirement has met with qualified support from the Institute of Financial Advisers (IFA).

“In general we support the recommendations,” says IFA president Nigel Tate. “But we think it misses one important factor – getting good advice.”

“Savings on its own isn’t enough. The real risk is that savers don’t invest their money wisely – or draw down at the right level in retirement. That’s where many will really benefit from good advice.”

Tate cites evidence going back decades that the most important factor is in where people put their money. “The right mix of cash, shares and so on is vital. Too conservative, and inflation will nibble away. Too assertive, and it might be too volatile for some.”

He says few people have the knowledge to work out what’s right for them – and that’s why a qualified adviser is so important.

“Also, how’s the average person going to know how much to save? Whether or not to retire earlier, or later? As the report says, people will be living a lot longer – will their money last? If they don’t make the right choices, they could wind up living on little more than the state pension”.

Tate also points out that retirement savings is just part of the picture, something the FSC release mentions when promoting group insurance. “But insurance, even more than savings, is not a one-size-fits-all,” says Tate. “Everyone is different, and every product is different. Having insurance in KiwiSaver Plus wouldn’t necessarily meet someone’s needs during their entire life. There could be some potentially big risks that simply aren’t covered at all, or not to the right level.”

ENDS