Opinion – Grain in Grain: Most disregard this investment vehicle for its past

Do you remember what it was like to travel by plane or have a phone 30 years ago? Products and services evolve over time or are replaced. The same is true in the financial area. Many keep the image of what pension plans were like and carry the negative image to this day. I explain how they have evolved over the past five years and why you should consider this vehicle in your investment portfolio.

I remember that traveling by plane was very expensive, uncomfortable and elite. On telephony it was even worse.

A telephone line was an asset that was included in the income tax return and was disputed in newspaper classifieds. In the dorm where I lived in college, not everyone wanted to contribute to the rent of the telephone line, because not only was the rent expensive, but so were the calls.

I don’t need to explain how these services evolved, as you already use them today and you know how everything has changed.

Now, imagine a person who last flew by plane 30 years ago and stopped using the phone in the meantime. What image do you think she should have of these services? What would be the likely recommendation she would make about them?

In the same way, many people still have a negative image about pension products, as the image they keep is that of the product they applied more than a decade ago, but failed to apply, as they were not suitable.

Others still have an outdated pension product and, therefore, carry the same old opinion, as they have not yet felt the evolution. These are almost like the case of my grandmother who possibly had her phone lines on the IR statement and the same dial-up phone until recently.

For the latter, there is a fear of change. Many do not change, as they are haunted by managers who justify that the change would cause loss of benefits. Most of the time, as I explained before, the benefit that is argued to lose to avoid leaving is similar to sand in the desert, that is, it is worthless.

Currently, if you see someone talking bad about private pensions, you can be sure, this person is not aware of the evolution.

Private pension products have evolved significantly in the last five years.

First, the fees charged have dropped significantly. Some were even extinct. For example, you might remember what was called a load rate. There are still old products that charge a 9% charging fee. Unbelievably, many still carry this “wagon” in their portfolios and do not know that new products do not have this charge.

There were also significant regulatory changes that made the way in which products and managers work more flexible. This allowed renowned managers to replicate their strategies already applied to the funds in pension plans.

Today, private pension is a vehicle that you can diversify into fixed income, multimarket, equity and international strategies.

There are five major advantages of pension products: lower income tax, absence of quotas, postponement of income tax in exchange for strategies, ease and lower cost in the process of transferring resources to heirs.

As a result, pension products have become a fundamental strategy for the long-term investor and for anyone thinking about estate succession.

Considering the evolution and these advantages, the inclusion of this investment vehicle is essential in a long-term investment planning.

Michael Viriato is an investment advisor and founding partner of Investor’s House

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