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As client relationship managers, every day, we speak to investors. While we cannot give investment advice, we do have some tips on what exactly to ask client relationship managers to help them help you.
THE QUESTIONS TO SKIP…
We get these questions every day, not because some clients are "not smart", but rather because they’re not well enough informed on what to ask.
Here’s why these are not the best questions to ask:
1. What is your best performing fund?
This is an impossible question to answer because performance is all relative.
For instance, what are you comparing it to? Other funds within our portfolio? Funds within other investment companies’ portfolios? The broader market? And if it is the broader market, which part of it – domestic, offshore, high risk investments, low risk investments?
Most importantly, performance is, by definition, historical. Our best performing fund for the last year may not be the same as our best performing fund 10 years ago. So the answer to this question depends heavily on the investment timeline you’re interested in.
2. What is the best investment product for me?
Every person’s investment and/or retirement needs are different, so we can’t answer this without crossing the line over to financial advice.
The product options we can offer all depend on what your savings goals are, how long you have to achieve that goal and what type of risk you’re willing to assume. These all-important factors should be carefully considered before you ask about specific investment products.
3. Will I have enough money to retire if I invest in a Retirement Annuity (RA)?
It’s not as simple as that, as there are a lot of options within the RA product range.
Again, you need to first work out how much you need to successfully retire and how much risk you’re willing to assume. Only then can we provide options best suited to your retirement goals.
4. Which is better, an active or passive fund?
This is the same as asking which is better, an apple or an orange. Passive and active are two entirely different investment products, both with pros and cons, depending on what your individual needs are.
5. Will my money be safe?
Another open-ended question, as it depends entirely on the product(s) you choose and the level of exposure you’re willing to take on.
PLEASE RATHER ASK US…
There is no one-size-fits-all solution when it comes to investing.
The more research you do and/or credible advice you get from a certified financial advisor, the better we are able to help you to choose the right investment product(s) for your specific needs. Once you’ve done this exercise, you’ll have the knowledge to ask us the right questions to drill-down on suitable investment products.
Questions like these:
1. I have X amount of money to invest over Y years and I want to retire with Z. What kind of fund do I need to retire successfully?
Now we’re talking! Knowing this basic information immediately eliminates so many options, and we can really focus on suitable funds.
It also takes the focus off what you want, versus what you really need. For us, retirement investing is not about how much money you can make; rather investments are there to assist you to enjoy retirement without having to worry about your money running out.
So the question to really consider is: what kind of fund(s) will ensure that I achieve my personal goal? This will then assist you to determine what risk best suits your personal position. For example, consider what kind of exposure you may need to the different asset classes. This will help us guide you to the funds that best suit your circumstances.
We feel that if a client cannot determine what fund they need before calling us, then speaking to a financial planner will assist them in making this important decision.
2. Which product(s) will help rapidly grow my retirement savings? / Which product(s) will protect my capital?
Right, you’ve worked out your end goal and either realised you’re falling short and need to boost your savings, or you’re doing well and don’t want to risk losing any capital. It all comes down to risk exposure, and the rule of thumb when deciding how much exposure you can afford is to look at where you are in your investment life cycle.
If you’re relatively young, you can generally afford to invest in products that are higher risk, because if you do lose some capital you have time to make it up.
Conversely, if you’re close to retirement low risk products are the way to go to protect your capital. If you’re somewhere in the middle of your investment life cycle, we can offer a combination of funds so that your portfolio is made up of high, low and/or medium risk investments.
3. What are the exact costs and fees for X, Y, Z funds?
A crucial question to ask, as it enables you to do the sums properly.
When you do this, remember to also look at historical performance versus costs. For example, the Sygnia Life Berkshire Hathaway Fund is more costly than the Sygnia Skeleton Balanced 70 Fund, but Warren Buffett’s Berkshire Hathaway fund has historically delivered incredible returns that make those costs very worthwhile (in the latest annual letter to shareholders, Buffett summarised returns since 1965 at a whopping 20.5% for BRK – that’s more than double the S&P500s’ 9.7%).
4. What are the rules and regulations of fund X, Y or Z?
This is a biggie: Will you have access to your funds during the investment period, or only at a certain withdrawal time/age? What are the tax implications? What are the inheritance regulations should you die before the investment matures? These are just some of the fine print details you need to be aware of to make an informed decision.
5. How does your passive fund X compare to passive fund Y? / How does your active fund X compare toactive fund Y?
This is a great question to get because the client has done their research and is wanting to compare apples with apples, which we can then do by offering accurate, statistical information on costs, performance, risk and more.
Sithembiso Mlonyeni and Warren Buchanan are Client Relationship Managers at Sygnia. Views expressed are their own.
