I was reviewing a pension statement for a client recently and it occurred to me that there is no immediate way to see if any action needs to be taken with the fund choices.
All the client received was like a bank statement showing value at a point in time compared to the value previously like this
She had no real way of knowing if she should have received more return than she did, no real benchmark to make a comparison against.
So I've built a very short (and very unscientific) list of funds which have consistently under performed in recent years (typically over the last 5 years where data is available)
globalwealth.ie
If you have a fund on the list you might want to think about taking some action.
Its a good idea to reflect on the process that led you to hold a relatively poor performing fund in the first place. For example, was it based or some marketing claims by the fund manager that sounded good?
Having a process for selecting an investment portfolio can help you to avoid making further costly mistakes. Of course it doesn't assure a better outcome but if you have a good process then you should at least expect a better outcome.
Remember that there are really only a few "levers" that anyone can pull when it comes to retirement planning
That's it. Everything else is probably just marketing fluff. And of these, overwhelming the the first combined with the second have the biggest impact over time.
Some suggested considerations in no particular order
1) Obtain a list of alternative funds for your current contract. You need to know what your alternatives are. Generally passive, multi-asset portfolios should be available and preferred as a default option
2) What are the costs of switching to another fund? This is often a cheap option within the existing contract
3) Are you still subject to contractual early surrender penalties? Typically early surrender penalties will apply for the first 5 years. This needs to be factored into your decision process.
4) What are your objectives for this product? For example is this an AVC to a Defined Benefit Scheme or is this your only source of retirement funds? That will have a bearing on how much risk you can afford to take. See our DB estimation micro-site to estimate the "commercial" value of an existing Defined Benefit scheme.
5) Your financial circumstances, are you saving into (pre-retirement) or drawing down (ARF or vested PRSA) from the product?
If you are still saving what is your term to anticipated retirement, how much and how frequently are you making contributions. What is your capacity to bear investment risk (other assets,income, age etc)
If you are retired are you in good health? For example a male aged 67 in excellent health should plan for the income to last at least 25 years. Are you being excessively conservative?
6) Your attitude to and understanding of investment risk should be a factor but this is much less significant than having a good asset allocation over the right time horizon especially when working with a good adviser to help you to cope with the inevitable emotional roller coaster of investing.
7) Are you confident your existing contract meets your needs?
8) Should you consider obtaining a second opinion?
www.globalwealth.ie
All the client received was like a bank statement showing value at a point in time compared to the value previously like this
She had no real way of knowing if she should have received more return than she did, no real benchmark to make a comparison against.
So I've built a very short (and very unscientific) list of funds which have consistently under performed in recent years (typically over the last 5 years where data is available)
Is your investment fund a dog? - Everlake
We are frequently asked to comment on a client's existing investments only to discover that they hold an absolute dogs-dinner of investment funds.The following is by no means a comprehensive study but simply a list of some of the more common offenders.Typically, highly concentrated and thematic...
globalwealth.ie
If you have a fund on the list you might want to think about taking some action.
Its a good idea to reflect on the process that led you to hold a relatively poor performing fund in the first place. For example, was it based or some marketing claims by the fund manager that sounded good?
Having a process for selecting an investment portfolio can help you to avoid making further costly mistakes. Of course it doesn't assure a better outcome but if you have a good process then you should at least expect a better outcome.
Remember that there are really only a few "levers" that anyone can pull when it comes to retirement planning
- Save more and spend less
- Start saving as soon as possible
- Retire later or sooner
- Take more or less investment risk
That's it. Everything else is probably just marketing fluff. And of these, overwhelming the the first combined with the second have the biggest impact over time.
Some suggested considerations in no particular order
1) Obtain a list of alternative funds for your current contract. You need to know what your alternatives are. Generally passive, multi-asset portfolios should be available and preferred as a default option
2) What are the costs of switching to another fund? This is often a cheap option within the existing contract
3) Are you still subject to contractual early surrender penalties? Typically early surrender penalties will apply for the first 5 years. This needs to be factored into your decision process.
4) What are your objectives for this product? For example is this an AVC to a Defined Benefit Scheme or is this your only source of retirement funds? That will have a bearing on how much risk you can afford to take. See our DB estimation micro-site to estimate the "commercial" value of an existing Defined Benefit scheme.
5) Your financial circumstances, are you saving into (pre-retirement) or drawing down (ARF or vested PRSA) from the product?
If you are still saving what is your term to anticipated retirement, how much and how frequently are you making contributions. What is your capacity to bear investment risk (other assets,income, age etc)
If you are retired are you in good health? For example a male aged 67 in excellent health should plan for the income to last at least 25 years. Are you being excessively conservative?
6) Your attitude to and understanding of investment risk should be a factor but this is much less significant than having a good asset allocation over the right time horizon especially when working with a good adviser to help you to cope with the inevitable emotional roller coaster of investing.
7) Are you confident your existing contract meets your needs?
8) Should you consider obtaining a second opinion?
www.globalwealth.ie
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