Retirement funding needs a new approach

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"The plight of pensioners reducing capital to survive requires a different approach from financial advisers," says financial advisor Peter Larcombe who believes it's time to take a new look at retirement funding. Investors need to play a far more active role in decision-making and the financial services industry has to be less set in its views on how retirees and potential retirees should invest and more accountable for its actions.

Larcombe says that his own experience in the industry led him to realise that those investing for retirement were overlooking some very basic principles that would enable them to move from being conservative investors who avoid risk at all costs to active participants achieving the same returns as other investors. Last year, he decided to take this a step further and outlined his new approach to investing in detail. His recently released book - Creative Investment Planning for South Africans - is the result.

Guide for higher growth

This book has been written to guide investors and retirees in particular, towards higher growth on their investment funds without losing capital through the complete economic cycle. The unique approach suggested in the book outlines how retirees can draw from their investments during a period of market downturn or recession without losing capital and retaining the higher growth investments.

In his book, Larcombe covers all bases - what needs to be done, why and how. He draws on proven and successful techniques to show how an investor can grow his or her savings to ensure that there is enough capital at retirement and then make it last, how an investor can draw from investments during a recession without losing capital, how investments can be optimised with little or no tax implications and to identify specific investments that match risk and return objectives.

New challenges

He says that that the 21st century has introduced new challenges with globalisation, information technology and financial complexity. Many international financial institutions have exploited profit incentives for management and shareholders at the expense of investors and taxpayers - practices that played a major role in the seriousness of the 2008/9 recession and eroded the credibility of the financial services industry as a whole.

Investors have become very sceptical of the financial industry at large. In order to allay these fears and provide a better platform for financial advice in the future, he suggests that investments and portfolios be subject to more regular reviews than might have been undertaken prior to 2000.

Disseminating information

He adds that the more aggressive and active investment stance put forward in his book also suggests that the industry needs to be more proactive in disseminating relevant information to assist investors with their decision-making and needs to offer a more definitive classification of the risk and return implications for each sector.

Larcombe also insists that financial advisors, who may not be investment specialists or proficient enough, need to identify when to call for extra professional assistance from within their management teams. "The large financial institutions have the technical knowledge within their companies and should disseminate it on a regular basis so that those financial advisors who are not investment specialists are proficient enough and empowered to offer the necessary level of service to meet their client's needs."