Question:
If you see a new financial adviser and he says you must transfer your retirement annuities to another provider, but your previous broker says it is not in your best interest to transfer it, who do you trust??
Answer:
Dorette,
Unless you only pay their advice, and not for the products they sell, you should never trust your financial adviser or broker. Why? Because if you pay them for the product they sell you, then they have an inherent conflict of interest - between what is best for you, and what is best for their back pocket. Most brokers and advisers earn commission on the products they sell, so they are incentivised to sell you products that earn them a higher commission, even if these products are not really appropriate for you. This commission comes out of your investment return, so the more you pay in commission, the less you earn in returns. Over 30 or 40 years, earning a 1% lower return will result in a 30% lower savings value. Your current situation just confirms this: your current broker thinks you should keep what you have, your new advisor thinks you need a new product (so he can earn money off of you).
What you really need is a low cost retirement annuity - fees less than 1% pa, with an asset mix that matches your time horizon. if you are a long term investor, you need a high allocation to equities. You also want a new age (unitised) retirement annuity rather than the policy-based retirement annuities that the life companies (Sanlam, Old Mutual, Discovery, Liberty etc) sell. With a policy-based retirement annuity, if you want to change your contributions, or you can't afford to pay them any more, you will incur a penalty of surrender charge that can be as much as 15% of your retirement annuity value. You don't pay these charges with a new age retirement annuity. You also don't have to buy your new age retirement annuity through a broker, you can go direct. Please refer to our Financial Education section. It will take you 5 minutes to read, and you will then already know more about the things you really need to know, than your broker.
