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The key ingredients that make it more likely you can relax and enjoy your life after work have been revealed in an FMA survey of older New Zealanders. The FMA commissioned Colmar Brunton to survey New Zealanders aged between 60 and 74 years, to find out their experiences of retirement and how information or advice has helped them manage their retirement savings.
Older New Zealanders reporting strong confidence about their retirement have three key things in common:
1. They started retirement planning early. Ten years or more before retirement is best, but confidence begins to sharply increase even six years out
2. They got help from an adviser, family, financial provider, or through their own research on four key topics (described below)
3. They have a wider range of investments with an emphasis on growth investments.
People who had sought advice from a professional adviser were more likely to have invested in shares, bonds and managed funds.
In a second piece of research involving the clients of Authorised Financial Advisers (AFAs), investors reported seeking help mainly because they received a lump sum, such as an inheritance or proceeds from the sale of a business or property. Many of these clients were concerned they didn’t have the knowledge to prepare properly for retirement. They were also looking for guidance on how to achieve better returns for their investments.
Almost all AFA clients said that establishing trust with their adviser was crucial and this was based on clear communication throughout the relationship. Investors who work closely with an adviser were happier choosing a broader range of investments, taking more risk and worrying less about ups and downs in their investments.
Paul Gregory, FMA Director of External Communications and Investor Capability, said: “A lot of existing research, including our own, has shown how poorly prepared the majority of older New Zealanders feel about their retirement. With this work we wanted to engage with people about the factors that would make them feel confident, and ask them why. We hope the insights these people provided will prompt New Zealanders to take some action.
“One of the most important things we found was that while getting advice from a professional, regulated financial adviser works, it’s not the only route to confidence. Talking to family and friends, opening some books or using the internet, or resources from a financial provider, were just as good provided they covered the four key topics in the report.
“The real difference comes from starting early. The investors feeling most confident are more likely to have looked for information or advice more than 10 years out from retirement. They are also more likely to have a healthy retirement savings balance. But there is still a lot of confidence, and significant final retirement balances, among investors who started between six and 10 years out from retirement,” Mr Gregory said.
“None of this is particularly surprising. Starting your planning early and getting help are common sense. But we’ve gone a step further and had investors tell us that if you do these things, you feel confident, are invested sensibly, and will end up with better financial resources in retirement,” Mr Gregory said.
Four key topics to think about to help you ‘wise-up’
Investors feeling confident about retirement have identified four key topics that have helped them get set up for life after work. From the professional advice or other help they got, investors feel comfortable because they understand:
1. The most suitable investments for them and their goals.
2. Their finances and budgets, so they can have confidence their money will last.
3. They can check in with their investments, including with expert help, to get further guidance.
4. Investment risk, so they worry less about investments going up and down, and also how it impacts the amount of money they will have to live on.
Colmar Brunton survey here
FMA research into New Zealanders’ experience of advice here
The Colmar Brunton Survey
The Colmar Brunton research was carried out online in December 2016. A total of 501 people aged 60 – 74 years participated in the research. The margin of error is +/- 4.4 per cent.
Key findings from Colmar Brunton survey
Percentage of people who are looking for information or advice about retirement planning:
75% of respondents said they had sought out help, information or advice
Of the 75% of respondents who looked for advice, information or help, here are the key findings:
Why people look for information or advice
Worry retirement savings won’t be enough (44%)
Where people go for help
· Professional financial adviser (39%; or 29% of the whole sample)
· Family, friends or colleagues (37%)
· Books, newspapers or internet (37%)
When people look for information or advice
· 37% looked more than 10 years from retirement
· 24% haven’t looked for any information or advice
· People who received advice from a professional financial adviser were significantly more likely to do this more than 10 years from retirement
How information or advice has helped people
33% are extremely or very confident they are financially prepared for retirement – this group were also more likely to have looked for information more than 10 years from retirement.
79% have made better financial decisions
Among those that are extremely or very confident there was no significant difference between those getting professional advice and advice from other sources. However, among those using a mix of professional advice and their own research, they were:
· More likely to say they were confident overall (89% versus 74% if no adviser)
· More likely to hold a wider range of investments, with bigger focus on growth investments (see slide 18 )
The FMA’s qualitative report into experiences of financial advice at retirement.
This report summarises feedback we gathered from 10 authorised financial advisers and 104 adviser clients about advice close to, or at retirement. The purpose of this research was to find out if financial advice helps New Zealanders manage their retirement savings.
Our research collected information about:
· what prompts people to seek advice
· what a typical client profile looks like
· how the advice conversation goes
· what good results look like.
The report has used a mix of direct quotes and examples to illustrate respondents’ views.
Our survey found that, overall, 87 per cent of AFA clients surveyed were confident they were financially prepared for their retirement.