Towards improved financial services and treatment of investors in retirement funds.
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Date
2013
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Abstract
It is a common practice that people earn income during their period of active employment and they
save part thereof to sustain their livelihoods when they retire. A variety of investment vehicles is
available to use as means of saving for retirement. Unfortunately not all persons who save for
retirement do retire in a position of financial independence due to a number of reasons including
insufficient funds available at retirement to cover the retiree’s cost of living.
This research project aims establishing the most common reasons as to why investors’ savings yield
less than what was anticipated or projected at the time of putting the investment plan in place. Data
was collected via a questionnaire that was distributed to a random sample of 150 users of financial
services using a snow ball sampling approach.
Statistical analysis revealed that 50% of the participants were males and 50% were females. The
majority of them (99%) were employed thus had less time to manage their investment portfolios,
and that 68% have a tertiary qualification. Only 1.3% have ABET level of education. Of the
participants 42% based their investment decisions on the advice given by the financial advisors and
placed 85% of their combined investments with the banks and insurance houses. Only 2.5% of the
participants had expert knowledge of the investment vehicles they opted for. Of the rest, 35%
indicated that the adviser’s motive was commission driven and a further 17% indicated that the
adviser failed to conduct a proper financial needs analysis. Of those who suffered losses 59% lost
between R1 and R5,000, 25% lost between R5,001 and R10,000, 13% lost between R10,000 and
R50,000 and 3% lost more than R100,000 due to improper advice. It was observed that 53% of the
participants did not know or were not sure of where to go for recourse regarding complaints relating
to improper rendering of financial services. Only 47% knew how and where to lodge their
complaints whilst more than 49% was of the view that literacy and awareness campaigns were not
prevalent.
The study could be used by institutions like the Financial Services Board and the Office of the
Ombud for Financial Services Providers to strongly consider investing in raising consumer
awareness and educating consumers about remedies available to them should a need arise. It could
also be used by financial institutions to improve the way they conduct business in order to build a
positive reputation and restore investors’ confidence in them – all which are pivotal to entrench a
mutually beneficial relationship that is necessary to ensure sustainability of the industry in a longer
term.
Description
Thesis (MBA)-University of KwaZulu-Natal, Durban, 2013.