financial security income earners

Transcription

1 financial security barometer 2011 insights i into SA s middle to upper income earners August 2011

2 presentation outline ~ background to research ~ research objectives & methodology ~ incidence of using a financial planner ~ financial behaviour ~ financial provisions ~ retirement planning ~ financial planner remuneration ~ financial security barometer results ~ key insights i 2

3 financial security barometer 2011 background to research

4 background to research study vision empowering South Africans to achieve lasting financial well-being mission we empower our clients to attain long-term financial security and well-being through our trusted advice and effective implementation business objectives to encourage people p to take control of their finances through a personalised financial plan to increase knowledge around financial planning 4

5 financial security barometer 2011 research objectives & methodology

6 research objectives ~explore perceptions/associations p with the terms financial security and financial wellbeing & understand the relationship between these terms ~ determine the need for financial planning and gain a better understanding of the way in which people do financial planning ~ understand the impact of financial literacy and financial planning on financial well-being 6

7 sample structure ~ household income of at least R30 000p.m (before deductions) ~ 35+ years old ~ involved in financial decisions of household ~ own at least two different investment/savings products ~ not self or close family/friends working for a financial services company ~ a mix of retired and pre-retired individuals ~ reside in the main metropolitan areas of South Africa (Johannesburg, Pretoria, Durban and Cape Town) ~ quotas (in terms of age, gender, race, geography and work status) were set to ensure that the achieved sample was representative (AMPS was used as a guideline to set the quotas) 7

8 research methodology aim: gather data among a representative sample of the target audience determine the issues relevant to the market; use the feedback to inform the development/refinement of the quantitative questionnaire qualitative pre-survey phase quantitative survey of market quota survey of 600 respondents (n=411) plus a quota of 200 acsis clients computer -aided telephonic interviews (CATI) in metro areas of SA series of 4 groups reflecting the broad composition of the proposed sample 90-minute discussion groups 8

9 key qualitative findings financial i planning financial security obtained by effectively executing the plan (making investments, buying products, etc) financial well-being a continuous process: plan needs to be reviewed regularly to a continuous process: plan needs to be reviewed regularly to ensure financial security is still in place, this will then lead to financial well-being you ll only achieve well-being if you stick to your plan

10 financial security barometer 2011 i id f i fi i l incidence of using a financial planner

11 incidence of using a planner Do you have a financial planner who advises you on a regular basis on your financial matters i.e. someone you have built a relationship with and whom you trust? all respondents (n=411) 47% 53% yes no base: all respondents

12 reasons for not using planner Why don t you make use of a financial planner? respondents (n=192) don t need a financial planner, can do my own thing 52 don t feel like I have enough money to see a financial planner 21 don t know where to go or who to go to 7 don t trust financial planners 7 not interested in financial planner, don t need one 6 % base: respondents without planners

13 type of financial planner used Who is this person? Is he/she a? 42% 39% 9% 6% 3% 1% independent financial tied agent/rep from a personal banker/adviser accountant/lawyer/tax family member someone else planner, not tied to a specific institution large financial institution from bank/bank broker consultant base: respondents with planners

14 role of financial planner What role does the financial planner play in your financial decision-making processes? Would you say you? 81% 11% 8% rely heavily on planner, follow advice to large extent consult with planner, but take the final make decisions without consulting planner, decision based on planner's advice & other inform him/her afterwards sources base: respondents with planners

15 frequency of meeting with planner How frequently do you meet with your financial planner to review your financial situation? 26% 27% 26% 15% 2% 4% regularly/monthly once every 3 months once every 6 months once a year once every 2 years as & when needed/ad hoc basis base: respondents with planners

16 awareness of qualifications Does your financial planner have any formal qualification(s), e.g. a degree, a certificate in financial planning? 67% 31% 2% yes no don't know base: respondents with planners

17 awareness of qualifications Please specify which qualification(s) your financial planner has? BComm 14 CA / accountant 13 economic, financial, financial management degree 3 financial certificate / qualification 2 CFP 2 insurance qualification / PPS accredited 6 law degree 1 degree ee (unspecified) ed) / master s s degree ee / post graduate 16 BA 1 MBA 3 diploma (unspecified) 1 other 3 don t know 43 % base: respondents with planners

18 financial security barometer 2011 financial i behaviour

19 financial decision-making To what extent are you involved in the financial decision-making of your household, i.e. where to invest, how much to invest, which product(s) to take out, etc.? jointly responsible solely responsible 63% 64% 61% 37% 36% 39% all respondents have a financial no financial (n=411) planner (n=219) planner (n=192) base: all respondents

20 financial decision-making Which one of the following statements best describes how you and your partner handle your financial matters? 64% 17% 7% 12% my partner & I have equal say although we decide on some things together, we generally do our own thing my partner takes the lead I take the lead base: respondents who are married/living together

21 level of financial knowledge How would you describe your level of financial knowledge? all respondents (n=411) with a planner (n=219) no planner (n=192) 49% 47% 51% 43% 46% 40% 6% 6% 5% 2% 1% 4% well informed & knowledge is good to very good reasonably informed & knowledge is above average not well informed & knowledge is below average not informed at all & knowledge is poor base: all respondents

22 sources of financial info/advice Which 3 sources do you consult/reference most when you need financial information or advice? all (%) with planner (%) no planner (%) financial planner internet friends, family or work colleagues financial newspapers/magazines financial programmes on TV/radio brochures, pamphlets produced by financial institutions make own decisions the bank other (includes accountant, lawyer, books) base: all respondents

23 financial security barometer 2011 financial i provisions i

24 Which of the following do you have? elements of financial plan with a planner no planner 96% 93% 91% 74% 81% 80% 77% 77% 51% 58% 42% 56% 59% 46% 62% 38% updated will, revised during the past year medical aid/insurance life cover retirement provisions emergency fund cover against loss of personal belongings/property investments to provide for specific goals other types of investments base: all respondents

25 financial security barometer 2011 retirement t planning

26 level of retirement planning Which one of the following statements best describes your level of planning towards retirement? pre-retirees have not started with retirement planning, still have enough time 45% 46% 46% 48% 45% 43% although I've started, I still need to do a lot more I'm happy with my level of retirement planning, I'm where I want to be 8% 5% 11% all pre-retired respondents with a planner no planner base: all pre-retired respondents

27 demographic analysis Which one of the following statements best describes your level of planning towards retirement? pre-retirees 58% 51% 49% 50% 47% 46% 47% 44% 44% 45% 44% 45% 31% 36% 14% 8% 9% 6% 9% 7% 0% R30K - R40K R40k - R50K R50K+ full/part time housewives married/living tog. single/divorced have not started with retirement planning, still have enough time although I've started, I still need to do a lot more I'm happy with the my level of retirement planning, I'm where I want to be base: all pre-retired respondents

28 demographic analysis Which one of the following statements best describes your level of planning towards retirement? pre-retirees 52% 50% 46% 47% 47% 45% 43% 44% 41% 38% 14% 10% 5% 12% 2% black coloured/asian white male female have not started with retirement planning, still have enough time although I've started, I still need to do a lot more I'm happy with the my level of retirement planning, I'm where I want to be base: all pre-retired respondents

29 level of retirement planning Which one of the following statements best describes how satisfied you are with your retirement provisions? retirees 53% 20% 27% have not made enough provision, wish I started t earlier I did as much as I could, but despite that t it is not enough to live comfortably I made enough provision and am able to comfortably continue my lifestyle base: all retired respondents

30 at what age did planning for retirement start? At what age, more or less, did you start your planning towards retirement? 43% pre-retired respondents retired respondents 35% 26% 29% 20% 14% 12% 12% 7% 2% yrs yrs yrs yrs 50+ yrs base: all retired respondents & pre-retirees who have started retirement planning

31 at what age did planning for retirement start? At what age, more or less, did you start your planning towards retirement? 47% with a planner no planner 34% 24% 29% 10% 10% 8% 14% 14% 9% yrs yrs yrs yrs 50+ yrs with a planner: 29.6 yrs average ages no planner: 33.0 yrs base: all retired respondents & pre-retirees who have started retirement planning

32 at what age did pre-retirees start planning for retirement At what age, more or less, did you start your planning towards retirement? started but still need to do a lot more happy with level of planning 48% 38% 31% 22% 13% 14% 10% 10% 10% 4% yrs yrs yrs yrs 50+ yrs average ages started but still need to do a lot more: 31.1 yrs happy with level of planning: 29.6 yrs base: all pre-retired respondents who have started retirement planning

33 at what age did retirees start planning for retirement At what age, more or less, did you start your planning towards retirement? 39% 31% 31% did not make enough provision 35% made enough provision 23% 17% 9% 12% 4% yrs yrs yrs yrs 50+ yrs average ages did not make enough provision: 29.5 yrs made enough provision: 27.8 yrs 0% base: all retired respondents

34 starting to save early ~ monthly contribution: R1,200 ~ growth: 12% ~ start age 29 and contribute for 36 years until retirement age 65 ~ start age 33 and contribute for 32 years until retirement age 65 fund value at 65 = R7,352,114 fund value at 65 = R7,352,114 fund value at 65 = R4,626,307 fund value at 65 = R4,626,307 6,833,714 4,309,507 contribution contributiongrowth growth 518, ,800 start age 29 start age 29 start age 33

35 starting to save early ~ monthly contribution: R1,200 ~ growth: 12% ~ start age 29 and contribute for 32 years ~ start age 33 and contribute for 32 years until retirement age 65 fund value fund at 65 value = R7,279,584 at 65 = R6,860,531 fund value at 65 = R4,626,307 fund value at 65 = R4,626,307 6,818,784 contribution contribution 4,165,507 growth growth 460, ,800 start age 29 start age 33 start age 33

36 starting to save early ~ monthly contribution: R1,200 ~ growth: 12% ~ start age 29 and contribute for 10 years ~ start age 33 and contribute for 32 years until retirement age 65 fund fund value value at at = R5,979,677 R5,070,677 fund fund value value at at = R4,626,307 R4,626,307 4,926,677 4,309,507 contribution growth 144, ,800 start age 29 start age 33 start age 29 start age 33

37 starting to save early 3,000,000 2,500,000 2,000,000 Fund value 1,500,000 1,000, , Year First 10 years' contributions Rest of contributions Growth on first 10 years' contributions Growth on rest of contributions

38 provisions specifically for retirement Which of the following have you taken out or are you investing in, specifically with the aim of providing you with an income when you are retired/in retirement? 89% with a planner no planner 71% 71% 66% 59% 61% 44% 39% 39% 23% 20% 30% RA fund provident/pension fund preservation fund unit trusts share portfolio (for dividends) property (for rental income) average no. of provisions with a planner: 3.4 no planner: 2.6 base: all respondents who have started retirement planning & retirees

39 pre-retirees provisions for retirement Which of the following have you taken out or are you investing in, specifically with the aim of providing you with an income when you are retired/in retirement? 77% 82% 76% started but still need to do a lot more happy with level of planning 66% 58% 52% 40% 41% 36% 44% 26% 19% RA fund provident/pension fund preservation fund unit trusts share portfolio (for dividends) property (for rental income) average no. of provisions started but still need to do a lot more: 2.8 happy with level of planning: 3.4 base: all pre-retired respondents who have started retirement planning

40 financial security barometer 2011 financial i planner remuneration

41 commission vs. fees Which of these 2 options do/would you prefer? all respondents with a planner no planner 43% 49% 50% 47% 38% 34% 13% 6% 2% 3% 3% 4% 1% 1% 1% 1% 2% 1% prefer commission prefer fees doesn't matter other don't know neither base: all respondents

42 Which of these 2 options do you prefer? age commission vs. fees comm. fees like both/no preference other none of two don t know % % % % % % yrs yrs yrs yrs yrs household income p.m. R R p.m R R p.m R p.m base: all respondents

43 advantages of commission What do you perceive to be the advantages of paying a planner commission? all (n=154) with planner (n=93) no planner (n=61) % % % planner gives best /good advice in order to get comm less hassle/easier & benefits both parties planner works for his money the company pays the planner comm is deducted over time, don t feel the impact of it comm is deducted over time, ensuring that planner services me for longer cheaper & costs less in the end motivates/incentivises planner no advantages don t know base: all respondents who prefer commission

44 disadvantages of commission What do you perceive to be the disadvantages of paying a planner commission? all (n=154) with planner (n=93) no planner (n=61) % % % no disadvantages the recommended product is often driven by the comm that the adviser can earn and not the client s need pay a comm even though there was no consultation, no advice, no service given, no benefit to the client pay comm but might not get right service, right info, all the info unstable income for the planner, which might influence him advisers will churn business in order to earn comm advisers don t always tell clients the amount of comm deducted from premiums don t know base: all respondents who prefer commission

45 advantages of fees What do you perceive to be the advantages of paying a planner a fee? leads to better advice since there is no commission to influence planner s recommendation all (n=194) with planner (n=109) no planner (n=85) % % % a once-off payment / no monthly payment pay for a service / planner provides a good service motivates planner / offers a little more incentive / works for his money cheaper / costs less in the end pay a fee for the planner s knowledge, expertise and advice only pay when making use of him / don t pay if you don t need his services fixed amount / know how much to budget for less hassle / easier standard amount, not dictated by product that is sold receive value for money independent opinion / unbiased view no advantages don t know base: all respondents who prefer fees

46 disadvantages of fees What do you perceive to be the disadvantages of paying a planner a fee? all (n=194) with planner (n=109) no planner (n=85) % % % no disadvantages a once-off fee might be a large amount of money to pay might not get the right service, all the info, the right info, or poor advice for fee pay even though there was not consultation, advice or service given how will one know that t the fee paid is a realistic fee? adviser might disappear after the fee has been paid, leaving the client to his own devices don t know base: all respondents who prefer fees

47 financial security barometer 2011 h fi i ll SA how financially secure are SA s middle-to-upper income earners?

48 financial security: own assessment On a scale of 0 to 10 where 0 = you do not feel financially secure at all and 10 = you experience a high level of financial security, where would you plot yourself? 34% 36% 38% 29% 27% 15% 10% 5% 2% 4 % pre-retirees retirees very low (0-2) low (3-4) average (5-6) high (7-8) very high (9-10) average scores pre-retirees: 6.4 retirees: 7.2 base: all respondents

49 financial security: own assessment On a scale of 0 to 10 where 0 = you do not feel financially secure at all and 10 = you experience a high level of financial security, where would you plot yourself? 44% 41% 26% 28% 21% 8% 9% 10% 12% 1% with planner no planner very low (0-2) low (3-4) average (5-6) high (7-8) very high (9-10) average scores with planner: 7.0 no planner: 6.0 base: all respondents

50 financial security: reasons for very low and low scores find it hard to make ends meet (7%) don t have necessary financial knowledge (3%) don t have all the products to be secure / don t save enough (21%) because of the economy/inflation (21%) Very low / Low scores 0-2 / 3-4 / very low/low scores (0-4) uncertainty about what s going to happen, about the country & the world (14%) don t earn enough / need to earn more money (7%) unemployed / no permanent job / retired (5%) no spare money for emergency (3%) have not started planning as yet (3%) can never have enough / never be 100% secure (2%) have debt to pay (2%) can t afford to retire now (2%)

51 financial security: reasons for high scores have made enough provision for future (51%) have good financial adviser no debt/accounts (2%) to pay/no financial obligations (7%) employed/ get a pension (7%) have financial knowledge (3%) live within means/ diligent with money (1%) have enough money to live comfortably (5%) can never have enough / never be 100% secure (4%) don t have all the products to be fin secure / do not save enough (5%) Very low / Low scores 0-2 / 3-4 / high/very h/ high h scores (7-10) started saving at a young age (1%) have debt to pay (2%) unemployed / no permanent job/retired (2%) because of the economy/inflation (9%) no spare money for emergency (6%) uncertainty about what s going to happen, about the country and the world (10%)

52 factors impacting on financial security To what extent do the following factors affect your financial security? 40% 38% 34% 27% 23% 15% 16% 6% economic developments political environment large extent reasonable extent not really not at all base: all respondents

53 factors impacting on financial security To what extent do the following factors affect your financial security? 43% 31% 30% 34% 18% 20% 14% 9% social issues own personal situation large extent reasonable extent not really not at all base: all respondents

54 financial security barometer ~objective measure ~ obtained via statistical analyses ~ responses to certain questions were reviewed & categorised into specific factors ~ factors for pre-retirees: have enough for now, product holding, future planning, lack of financial responsibility ~ factors for retirees: enjoying fruits of provision & planning, well updated on financial affairs, savings, product holding, level of financial difficulties ~ through regression analysis, factors were then scored & weighted according to influence on financial security ~ objective financial security barometer score obtained

55 financial security barometer pre-retirees retirees barometer score own (subjective score) base: all respondents

56 financial security barometer barometer score for pre-retirees retirees with planner no planner base: all pre-retired respondents

57 scores per demographic pre-retirees all yrs yrs yrs yrs yrs R30 - R40K R40-50K R50K+ black col/asian white male female base: all pre-retired respondents

58 financial security barometer 2011 key insights i

59 key insights ~ knowledge is power & consumers need to ensure they are more informed ~ awareness of a financial planner s qualification is a key determinant to assess a planner credibility ~ clearly understanding a planners remuneration model is vital in understanding the role they play ~ consumers are delaying the planning for retirement to their own detriment ~ people are living longer but saving less heading towards a crisis ~ the benefits of saving early & compounding should not be underestimated ~ understand the value of good financial planning advice those with financial planners have more diversified provisions save ~ those with financial planners have more diversified provisions, save earlier & are more financially secure

60 financial security barometer 2011 thank you