Adrian Gore's remarks at the Discovery Financial Planning Summit

 “Without great financial planning, without great financial planners and without brilliant financial advice, people will fail in their financial affairs in retirement” says Adrian Gore, Discovery CEO, opening the first Discovery Financial Planning Summit.

Gore says that although we live in a unique and beautiful country, we cannot overrate how vulnerable we are. “It is one of the most unequal countries in the world with a huge Gini-coefficient. While government should and will focus its resources on people in need, South Africa's social safety net is less sufficient than that of the UK which offers an extensive social security system, and also the US and even China which have greater forms of social and health support.

Most people engage in a financial needs analysis that involves budgeting tools, and looks at salary and retirement needs. “This critical tool is so rational that it can lead to irrational behaviour” points out Gore. “Loss aversion behaviour makes people react much more to a potential loss than a potential gain. They focus on the numbers and see the plan as a threat rather than a goal. People need to become more motivated by life issues such as avoiding your children from having to take care of you. Also, people tend to see themselves as strangers in their retirement planning. This has to change so people can emotionally connect with one day being in that position.”

Gore highlights human traits which can be damaging to retirement planning. “One of these is hyperbolic discounting, which is instant gratification and disproportionately valuing the present. The others are optimism and overconfidence. Studies show that people think they are in fact different to others.” An excellent financial planner will encourage people to give up the 'now’ mentality and plan for the future, and also provide a reality check that they are not so different to others and face the same risks.

Another problem with financial planning is that people perceive time to be linear. “In fact, time is not linear” says Gore. “The future is not as long as you think as each year is not weighted equally. The working period is actually a smaller portion of your life than you think, so the time to plan for retirement is less than what you imagine.” Once again a competent financial planner will prompt people to understand the effect of this timeline and plan effectively.

Also on Gore’s list of retirement planning pitfalls is underestimating life expectancy. “People believe they are invincible while they work, then think they will retire and pass away ‘on cue’- However the danger is in fact the other way round."

“Living longer is a complicated issue in terms of retirement funding” concludes Gore. “People left to their own devices could tragically end up destitute, living longer than they think, unable to afford desperately needed healthcare. Financial planning in SA is a well regulated industry, offering a much needed service and we should all make use of it.”