It is one of the most pressing financial concerns for most of us: how do I ensure that my savings are sufficient to maintain my standard of living during retirement?
Yet this concern remains heavily disregarded by most individuals, particularly in Germany where over 90% of retirees rely mainly on public pension schemes¹. Several developments related to our society and its economy, such as the demographic shift in the population towards older generations as well as the sustainably low-interest-rate environment, lead to the unsuitability of public pension to provide sufficient coverage for retirement.
Despite several additional savings products other than public pensions, such as company or private pensions, the main challenge of converting cash assets into suitable investment products remains.
For most people, the challenge starts with awareness. The majority of future retirees are not even aware of their existing retirement gap. Also for the case of retirement planning, the simple logic prevails: the sooner one is aware of existing retirement gaps and the earlier one starts investing, the higher the expected returns and hence the lower the risk of facing such gaps. The issues resulting from retirement gaps can be severe and may very well result in poverty. Already today, 20% of the German population live in or are at risk of old-age poverty². The issue of existing and widening retirement gaps thus requires urgent attention from both the public and private sectors. The governments in countries like Norway, Sweden, and Denmark have already identified the issue and provided their citizens with the necessary tools to understand their current state of pensions. These tools allow citizens to access a holistic online-view on their earned pension and also supply them with useful forecasts to simulate changes to their pension income. Although there are ongoing government-driven initiatives in Germany, the task of increasing awareness remains with the private sector for now. Nevertheless, the subsequent step of closing identified gaps remains.
With our digital solutions, Fincite provides the necessary toolset for users to become aware of existing retirement gaps and derive the right actions to close them. During this process, we not only take into account the user’s existing pensions but additionally consider their aggregated wealth in a holistic view. This might include additional assets, such as real estate, which can significantly impact the financial situation during retirement. By analyzing a user’s current and planned living and financial conditions, our software enables them to determine their required retirement savings and identify existing gaps. A workflow could look as follows:
1. Understand the client – connect current pensions, cash & investment accounts, real estate, and other assets to develop a 360° view of the client’s wealth
2. Determine financial needs – develop financial goals for retirement by exploring all incomes and expenses
3. Identify existing retirement gaps – determine existing gaps by comparing the expected returns of current assets with the client’s financial planning
4. Provide suitable products – choose suitable products to close the retirement gap, taking into account the client’s financial and risk-bearing capacity
5. Keep track – employ algorithms to monitor and realign the investment strategy during the saving and withdrawal period
With this approach, you’re able to provide your clients with investment solutions to address the most pressing financial concern and at the same time generate useful insight into the client’s state of wealth.