The absence of evidence is no evidence of absence. One would have read this line in detective novels, an analogy that can apply to retirement planning or to the inadequacy of the same, and in notoriously infamous cases, to its near-absence.

The analogy comes in handy when one discusses retirement plans with clients, as I did the other day with a senior citizen who discharged responsibilities all his adult life, as an employee, householder, and parent. His image would fit countless others of his ilk. His tragedy: a longish list of financial products but limited planning.

Yes, retirement plans are largely amiss in substance and style across socio-economic strata. Many of us end up with savings and investments that do not serve the real purpose. Portfolios get burdened with me-too funds, insurance plans and the like. They often create a maze of complications—expenses, fees, and commissions get paid routinely in the process.

The suitability of products is the key but who will test suitability, advise appropriate product and stop the investor from mis-buying? The answer can be compartmentalised but the chief responsibility lies with the advisor or the intermediary.

Indeed, ordinary investors without access to proper advice tend to have products with no recourse to plans. The mantra “Plan first, choose products later” fails to deliver in this case. Investors sometimes pick up products first—these very often include NFOs, IPOs, new insurance schemes and the like. The point is investors must create appropriate plans in line with their risk appetite.

How many of us know the existence of me-too funds in our list of holdings? These are the reasons our portfolios do not function perfectly. The result? Sub-optimal performance at best and limping returns at worst. Avoiding me-too funds at all costs is the standard caveat here.

Ditto for unit linked insurance plans, or the new-age value-added pension plans. Such plans often target retirees and add little value to their financial well-being.

Importantly, discerning investors sift through the deadbeat communication coming their way incessantly. They evaluate their current holdings, check performance, and explore the need for another product. Additionally, many are increasingly using the free and newer analytical tools. In this context, I have listed a few do’s and don’ts.

• Do not waste time on another me-too poduct resembling one of the elements that you already own.
• Instead, find alternatives. A pension plan need not be replaced by another of its kind but perhaps by NPS for some allocation. The same goes for a mutual fund even if another fund manager is involved.
• Diversification need is supreme; this should never be bypassed. If you have an over-concentrated portfolio at retirement, you will not enjoy your superannuated days, will you?

A retiree’s financial life can stay energised if the plan is worked out first, and products follow later.

By Nilanjan Dey, Director, Wishlist Capital