Financial Blunders- Lessons we never learn

1. Financial Blunders- Lessons we never learn

2. Agenda 2 4 1 Financial Planning Clues Introduction With some quick solutions Our Discussion Today 3 The unrealised Mistakes 5 Discussion www.fmlzim.co.zw

3. Financial Planning • Portfolios ought to be created for purposes of meeting Consumptive, Risk Management and Retirement purposes. Consistent portfolio management and re-balancing is a necessity as pension members progress through their Income Life Cycle and ordinarily migrate on the risk matrix. • Wealth accumulation activities should be maximised at reasonably early stages of members’ career paths while value preservation is maintained throughout. • Expert managed and personally managed investments aligned towards retirement funds form total funds; along the way ignorance, risk aversion and opportunity misses culminate regrettable mistakes.

4. Life Cycle Planning Periods .

5. Income Life Cycle .

6. Components of a Financial Plan .

7. Financial Planning • Investment advice and planning are equally relevant across all stages. • The general trend has been a sudden drop of professional advice and services the day someone walks into retirement. • The move while being a default for most, it has negative effects as Fund existence persists into post retirement and management of it is still relevant. “Make no little plans; they have no magic to stir men's blood. Make big plans, aim high in hope and work.”– Daniel H. Burnham

8. The Blunders- So Detrimental Yet Unnoticed

9. 1 Timing: Retirement during a Bear Trend • Markets are falling 20% as one retires • One is withdrawing 5% of their fund every year • With an initial $100 000.00 package, retiree closes the year with $75 000.00 • Next year cash-out will be 5% of $75 000.00 • Complement retirement funds with Cash Accounts • Is there scope to engage employer to defer retirement period to ride out waves on the market?

10. 2 Ignoring Inflation: Even the lowest • Inflation has a detrimental effect; ranges of 2.5% can double cost of living in 26 years • Buying power of pre-retirees is halved during full employment • The remaining half is eroded in the first 20 years of retirement • Contributions therefore may go merely unconsumed in real terms • Dominate portfolios with Equities, Real Estate and Alternatives Investments • At best, hold some equities even post-retirement and seek professional advice on an ongoing basis

11. 3 Panic: Dumping Stocks in a temporary dive • Pension matters are left to retiree soon after leaving the fund • Emotions take charge each time markets crash • Basing on individual decisions, they quickly sell off • This way fund continuity is partly guaranteed • Rather hire a specialist for advice, or at least keep contact with one on a zero-fee arrangement

12. 4Bad Investment decisions: Herd Mentality • Investing in unfamiliar territory • Sack potatoes • Quails and their eggs • Stick to your lane or partner professionals in the chosen area • Identify your place in the value chain • Do due diligence when investing especially property; are there liens, is it not a land baron?

13. 5 Long life: Outliving your Money • Actuarially, salary replacement ratios are insufficient already • With such low pay-out ratios and no extra income on top of retirement • Then an extra years are added onto the expectancy • Best solution is delay making your pension claim • In so doing, push ahead more annuity receipts when it is really necessary “We have some control over when we retire. However, we have very little control over how long we live.”– Gordon Smith

14. 6 The Planning Mistake: Saving Too Late • Time is the primary and dominant asset in retirement investments • The ultimate pay-outs are a function of the time multiple • Procrastination on retirement is Wealth Suicide • Rather make fund specific and additional contributions now than double them later • In so doing, push ahead more annuity receipts when it is really necessary “Procrastination is the thief of time” – Edward Young

15. 7 Harvesting: Spending Too Much or Too Little • Rule of thump says spend average of 4% per annum post-retirement • While the rate sounds impoverishing, it is a better safeguard in case of inflation later on • Planning on spending rates rather aim to have funds in perpetuity • It is better to have more savings than be short of them “Nobody will die regretting having money. But surely you will regret the death of your savings before you die”

16. 8 Impatience: Quick Buck mentality • Lack of disciplined approach to savings • Treating savings as recurrent expenditure kitty • Scourge of past experiences (hyperinflation, falling ZSE, policy inconsistencies) • Longevity is a new reality-need to save as much as practical in real assets “Nobody will die regretting having money. But surely you will regret the death of your savings before you die”

18. Who is First Mutual Holdings Limited FMH

19. The First Mutual Journey 1990 02 05 07 2009 2003 Merger of Prudential, Norwich, Colonial Mutual Dollarization of the economy Demutualisation & Listing Today Going Beyond 1980 Demutualisation & Listing Zim Independence Prudential 1906 Establishment Nicoz Diamond Insurance 2018 01 03 04 06 1906 2008 2008 2009 2018 Q2 Q3 2019 1980 112yrs