Mastering what matters: a framework for retirement planning

In both investing and rugby, getting to the essence of what is important can hugely increase your probability of success.

This was the key message from Nic Andrew, the managing executive of asset management at Nedgroup Investments, during a recent PSG webinar.

“And if you’ve got a simple framework, your chance of being able to execute on that increases significantly,” said Andrew.

Speaking on the topic “Micro moves, major outcomes – a framework for decision-making in retirement”, Andrew drew parallels between financial planning and South Africa’s Rugby World Cup triumphs. Although tactics change over time, he said, core elements such as set pieces, defence, and kicking remain decisive.

He recalled the Springboks’ victory in the 2019 final in Japan, noting that their success, like previous squads’, rested on mastering the basics.

“On the one side, how much has changed… But on the other side, how much hasn’t changed – the importance of set pieces, and particularly the scrum, of putting your body on the line in defence, and most importantly, kicking,” he said.

Andrew singled out flyhalf Handré Pollard’s 13 successful kicks during the 2019 knockout stages as a lesson in preparation and consistency. Pollard’s meticulous process – setting the ball at a specific angle, following a precise routine – was a case study in controlling the controllables.

“Handré has often talked about completely understanding that he needs to accept and actually embrace the pressure,” Andrew said. “And you see that when he takes the ball, he seems to actually enjoy it. His whole preparation around setting the ball up at 30 degrees, stepping back four paces, and then playing means that he’s taken the shot clock out of contention.”

This discipline under pressure, he argued, is just as critical in retirement planning, particularly in uncertain environments.

“When environments are complex, or when one is under pressure, your emotions start to come in, and you tend to make suboptimal decisions. And that’s why I think it’s so useful to have frameworks.”

Focus on key levers

Financial advisers operate in a world of increasing complexity and external shocks, said Andrew, referencing political volatility, technological shifts, and ongoing macro-economic uncertainty.

“There’s so much that advisers need to deal with, and their clients need to deal with, whether it be tariffs and Trumps, Trump and tariffs, whether it be AI, whether it be the Government of National Unity,” he said.

In this context, Andrew urged advisers to focus on variables that genuinely influence outcomes. For the pre-retirement phase, he listed seven: current age, market performance, retirement age, starting capital, monthly contributions, asset allocation, and annual costs. Post-retirement, the key levers shift to the lump sum available, longevity, market performance, desired inheritance, withdrawal rate, asset allocation, and annual costs.

“But the thing about seven is that it’s quite a lot,” he acknowledged.

The challenge, then, is identifying which levers are both high-impact and within the adviser’s or client’s control.

“Which are more important? Which can you influence, and which lever should you pull to try to get the best outcome?”

A practical framework

To support decision-making, Andrew introduced a practical framework developed in partnership with United States-based firm The Big Picture.

Built on 100 years of historical market data, the model assesses the probability of retirement success across 950 rolling 20-year periods. Variables such as asset allocation, contribution rates, fees, and retirement age can be adjusted to see their impact.

“This period includes wars, oil shocks, and Covid,” he said. “So, I think [it’s] a really good representation of what’s likely to happen.”

He illustrated the tool using a hypothetical client, Mary – a 40-year-old brand manager earning R950 000 annually, with a R3-million lump sum and a contribution rate exceeding 20%. Mary’s goal is to retire at 60 with R13.5m. Concerned about volatility and high US equity valuations, she opts for a low-equity portfolio with a 2.5% total fee. The result: only a 9% chance of success based on historical data.

He singled out two levers that have a high impact with “reasonable ease”.

“There are things you can’t control – the market, someone’s age… The sweet spot is where something is easy to implement and has a big impact – namely, asset allocation and costs.

“The main thing to get right – and it’s a real challenge in the South African market – is to make sure that you get your asset allocation right,” said Andrew.

For example, increasing equity exposure to 70% lifts Mary’s chances to 36%. Reducing fees to 2% pushes success probability above 50%.

Although adjusting the asset allocation and reducing fees remain the most effective and easiest levers, he noted that retirement age adjustments and contribution increases are the next most influential changes, although often requiring more difficult client conversations.

For example, further improvements – such as delaying retirement to 65, increasing contributions to the 27.5% tax-deductible limit, or adding R500 000 in capital – raise the probability to 74%.

Advisers as behavioural coaches

Although quantitative frameworks help to sharpen focus, Andrew cautioned against ignoring the behavioural dimension.

“The main thing isn’t actually asset allocation. The main thing is client behaviour,” he said, referencing research from Dalbar, a US-based financial services market research firm, and Morningstar, a global investment research and data firm, headquartered in the US, indicating that emotionally driven decisions can reduce returns by 1% to 2.5% annually.

Advisers, he said, have a dual role: building technically sound portfolios and acting as behavioural coaches.

“That’s really where you as an adviser play such a critical role… holding a client’s hand to make sure that their emotions don’t prevent them from implementing their framework.”

Just as a Springbok kicker must filter out noise and trust their preparation before a decisive kick, financial advisers must help clients to remain focused on what they can control – asset allocation, costs, savings rates, and retirement age.

The framework, said Andrew, helps advisers to structure those conversations around high-impact decisions, increasing the likelihood of achieving a successful retirement.

“Success isn’t always about having the smoothest journey,” he said. “It’s the result of smart decisions made early and consistently applied – even when the pressure is on.”