Business Analyst - June 21

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Tuesday, June 21, 2022BANKINGWhy Bank Savings is not a goodretirement planning optiontHIS article is borne out of the differentoptions people consider fortheir retirement income and howappropriate it can be or otherwise.One reason people struggle financiallyin retirement is the inability to identifythe right financial products.the various notable retirement planningoptions include existing business, investmentinto equities, bank savings, property and evenchildren. this edition looks at the downsidesof fund accumulation using bank savings asan option. Remember that no option is bad initself, but the failure to identify and mitigatethe risks inherent in the options. the articlelooks at what pension schemes in Ghana canoffer in relation to bank savings.Pension funds in GhanaContributing to a pension fund is one ofthe very reliable sources of income during retirement.what is the difference between apension fund and regular bank savings?there is a downside to using bank savingsas a retirement income. Funds in a savingsaccount are exposed to the risk of inflationand the risk of shortfall*. For what we termdefined benefit (DB) schemes, the risk ofshortfall is somewhat mitigated as benefitsare based on qualifying criteria. an exampleis a 1st tier SSnIt benefit where one qualifiesafter contributing for 180 months. the level ofbenefits is based on a pre-determined formulathat uses the best three (3) years’ salary.Benefits are thus guaranteed and one risk ofshortfall is weaknesses in administration anddata management.Pension funds in Ghana –Defined-Benefit Schemesthe level of benefits under the defined –benefit is also index-linked. Periodic adjustmentswould be made based on inflation oran underlying“Rememberthat no optionis bad in itself,but the failureto identify andmitigate therisks inherentin the options.The articlelooks at whatpensionschemes inGhana canoffer inrelation tobank savings.market rate. again due to the fact that thegovernment is involved with SSnIt, benefitsare assured. this somewhat insulates thebenefits from the loss of purchasing power,though not entirely in our part of the world.there seem not to be much to worry abouthere.Pension funds in Ghana –Defined ContributionSchemesthe situation is however different fromthe other sibling called the defined contribution(DC) scheme. In Ghana, both the 2nd and3rd tier schemes are defined -contribution.Benefits depend on how much funds are accumulatedand the investment returns (lessall charges to the scheme). It has no qualifyingbenefit criteria except that one shouldhave contributed. therefore, your proceedsdepend on how well your pension scheme ismanaged.Pension funds in Ghana – the Riskswith these schemes the risks of inflationand shortfall in addition to investment riskare real. the risks reside in the general economicand investment climate as well as theperformance of the pension trustees and fundmanagers. the pension fund managers usuallyadvise pension trustees to invest thefunds for returns usually higher than inflation.If you should keep Ghs100 in a cabinetfor 3 years without any additions, the value(purchasing power) drops.Purchasing Powertherefore the Ghs100 cannot do in 3 years’time what it can do today. the purchasingpower will be eroded and eaten up by the inflationdinosaur. this animal has sharp teeth!a good way to keep the Ghs100 strong is to investand make some returns. a better way,however, is to invest the Ghs100 and make returnshigher than inflation.the inflation rate at the end of September2021 was 10.6 percent. In order to keep theGhs100 going at its appreciable strength, returnson it should be more than 10.6 percent.Pension Funds VrsBank Savingsi. nPRa Guidelines regulating PensionFundsthe guidelines permit schemes to investup to 75 percent of the funds in treasury instrumentsand 20 percent in equities(shares/equities of organisations). a goodcombination of these as well as other permittedasset classes in pension fund managementwould yield a lot higher than theregular bank savings would give you.additionally, the assets are highly regulated.the regulations protect the fund fromunnecessarily high-risk taking, as well asservices charges. these are all value to thescheme which monetary benefits becometangible over the medium to long term.with good management, a typical pensionscheme could yield anything from 19percent per annum. this is much higher thanthe 5-8 percent offered on typical savings atthe bank. Regular bank savings play a role inaccomplishing other financial objectives butdefinitely not accumulating funds for suchlong-term life objectives as retirement.ii. Compounding of Pension Fundsagain, with the compounding effect onpensions fund returns and the continuouscontributions, pension funds grow exponentially.For those not in any formal sector employment,there is the need to immediatelylookout for a private pension scheme to join.the nPRa website has amply provided informationon trustees you can register with. Ifyou are already in a formal sector arrangementit would be a good deal to look out forthe extra 3rd tier to contribute more (if thereis still some allowance on tax).iii. the Banking Failurethe failure of some financial institutionslately should also inform where you placefunds, else they would be wiped out beforethe time they are needed. Bank savings isuseful when retirement benefits are paidand one wishes to place a portion in a savingsaccount for easy access to funds.Instead of regular savings for a longtermaccumulation of funds, consider contributingto a pension fund. the pointsdiscussed above explain why Bank Savings isnot a Good Retirement Planning Option inGhana.*Inflation Risk: also called purchasingpower risk, is the chance that the cash flowsfrom an investment won’t be worth as muchin the future because of changes in purchasingpower due to price increases.*Shortfall Risk: Retirement shortfall riskis the potential that when someone retires,he/she will not have enough assets or incomeas previously expected for their retirement.*Rates are as of September 2021SOURCE: Ghana Talks Business
Tuesday, June March 21, 2022 1, 2022ENTERPRENEUR3 definitive rules for marketingtHE COVIDpandemic haschanged the waybusinesses selland market theirproducts and services tocustomers, and there islikely no return to the oldnormal.Prior to the pandemic,enterprise marketing effortswere largely focused on inpersonactivities, such asconferences, exhibitions,trade shows and activations.Fast-forward eighteenmonths and theoverwhelming majority ofmarketing activities nowtake place in the digitalrealm.Rules for Marketing in2022according to DumisaniMoyo, Marketing Director atSaP africa, this raises somefundamental questions.“the role of marketinghas changed forever, andmarketers now have to get togrips with what the futureholds. will marketingactivities remain digital, orwill they evolve into a hybridof digital and physical,especially as vaccinationrates rise and the worldreturns to some semblanceof pre-pandemic normalcy?and what are theimplications for the types ofinvestments marketers andtheir organisations mustmake to win the hearts andminds of current andprospective customers?”Moyo says marketershave valuable lessons tolearn from the pandemic asthey plan for 2022, and willneed to focus on deliveringhigh-impact marketinginitiatives that can helptheir organisations growfaster.“Marketers should focustheir efforts onunderstanding the customerjourney, using technology tofuel innovation within themarketing discipline, andstay close to customers andtheir data in order to providefrictionless omnichannelexperiences across thecustomer value chain.”Moyo points to threerules organisations need tofollow to succeed in the postpandemicera:Rules for Marketing in2022 #1 – (Really) understandcustomer journeysMarketing’s primary roleis to connect with customersat the right time and at atouchpoint where thecustomer’s purchasingdecisions can be influencedthe most. However, analystshave pointed out that thetraditional marketing funneldoes not capture all moderncustomer touchpoints, partlydue to the emergence ofempowered and informedcustomers and anabundance of choices thanksto digital channels.“Marketers need tothoroughly understand thecustomer buying journey,and apply data-driveninsights to understandingthe complex and often nonlinearbuying processes thatcustomers are likely tofollow in their purchasingdecisions,” says Moyo.“Empowered and informedcustomers are conductingonline research prior tomaking purchasingdecisions. Having anaccessible and – in africaespecially – mobile-friendlyonline presence helpsensure customers have themost relevant informationto inform their decisionmaking.”In addition, marketersshould align their resourcesand messaging to thecustomer touchpoints thatoffer the greatest impact onor influence over thecustomer’s buying decision.Rule for Marketing in2022 #2 – Use technology todrive innovationtechnology is essential tomarketing success in thepost-pandemic era. a recentCMO survey found that 43percent of marketers areinvesting in technology toimprove customerinteractions, and 42 percentare investing in dataintegration to enable end-toendcustomer trackingthroughout the buyingjourney.“this is an astonishing 71percent year-on-yearincrease and illustratesmarketers’ growing appetitefor access to data-rich tools,”says Moyo. “Marketingtechnology solutions canhelp automate processes,integrate siloed customerdata and enable marketers toutilize a broad suite of digitalchannels to drive sales bothonline and in-store.”Despite major growth inthe adoption of digital tools,“Marketers needto thoroughlyunderstand thecustomer buyingjourney, andapply data-driveninsights tounderstandingthe complex andoften non-linearbuying processesthat customersare likely tofollow in theirpurchasingdecisions,” saysMoyo.some marketing solutionsproviders are predicting thatthe volume of digitalmarketing may decrease inthe post-pandemic era.“Marketers are shifting theirefforts to making campaignsmore targeted andpersonalised, withtechnology enablingmarketers to optimise theirdigital marketing effortsacross customertouchpoints in online,mobile and in-storeenvironments.”Rules for Marketing in2022 #3 – Stay close to yourcustomers – and their dataRecent insights fromthe Harvard BusinessReview reveal that postpandemiccustomers havehigh expectations offrictionless, anticipatory,relevant, and connectedpurchasing experiencesacross physical, online, andother platforms.“to create suchexperiences, companiesmust ensure that themanagement andutilisation of customer datais at the heart of theirmarketing activities,” saysMoyo. “this requires the useof intelligent tools thatemploy technologies suchas predictive analytics,artificial intelligence andmachine learning.”Putting data at the heartof marketing enablesorganisations to createmore relevant and tailoredcustomer experiences. “Byanalysing customer data,marketers can create hybridexperiences that prioritisepersonalisation andconvenience. For example,through the seamlessintegration of physical andonline experiences thatallow a customer tovirtually try on make-upprior to purchase.”Moyo believes thatmarketers will be focusedon using intelligenttechnologies to betterunderstand customerjourneys for the immediatefuture. “Marketers and theirorganisations will continueto embrace technology, andapply data to create tailoredand personalisedexperiences for customers inthe post-pandemic era.”Source: African MediaAgency (AMA)
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