A financial planner can help you to find ways to manage your money more effectively so you can boost your savings.
If you consult one you will be asked many questions about your personal and financial circumstances – so it’s important to be prepared.
And be sure to give honest answers, even if you’re embarrassed about financial mistakes you may have made, because this will help your financial wizard to come up with the best plan for you.
- Bank statements
Gathering together three months’ statements will give a clear picture of your income and spending patterns. If you identify bad habits, it means you have some scope to save more money or to pay off debt. Your financial planner can look at this with you and help you compile a budget.
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Other information your financial planner will need includes details about any investments such as shares, unit trusts, savings and retirement funds or retirement annuities you may have; policies such as house and car insurance, life, funeral and income cover; and your debts.
The planner may ask you to sign a document to grant permission for them to access your financial information regarding policies and investments with companies.
- Evaluate your debt
If you manage to pay your debts monthly through your earnings, a trained financial planner can make this part of your budget and suggest ways to pay it off more quickly.
But if you’re struggling to payoff debt, it’s better first to speak with a qualified debt counsellor who is registered with the National Credit Regulator (NCR), says Tamryn Lamb, head of retail distribution at Allan Gray.
This should be a priority of your financial planning because you must get debt under control to be able to save more.
- Understand your risk appetite
Some investments such as shares are more risky, because they’re dependent on fluctuations in the market, but can earn you more money in the long term. Investors basically have three risk profiles – conservative, moderate and aggressive. If you invest conservatively, you don’t want to run the risk of losing money, even if this means your investment won’t grow much.
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Moderate investors are willing to take more risk but they’ll want to limit capital losses as far as possible.
Aggressive investors focus on strong growth, and are generally prepared to invest for longer periods (more than five years).Your financial planner will advise you on the amount of risk you should be prepared to take and help you to choose investments accordingly.
- Identify your financial goals
Consider in advance what you wish to achieve financially, for example to save for retirement, buy a house, invest for your children’s education. The planner can workout how much money you have available for your various goals and explain ways to achieve this.
- Is your planner an agent or independent?
A planner who is an agent represents specific companies and can only offer you their products and services. Independent financial planners aren’t linked to certain companies and should be able to offer you products, quotations and rates from various companies to find you the most suitable financial solution.
First check what the costs are because many independent financial planners only charge a consultancy fee. You pay them just for their work and time spent on you instead of an ongoing fee.
Financial planners are licensed by the Financial Sector Conduct Authority (FSCA) based on their qualifications and experience with regard to the type of products they sell and the planning services they offer.
This means that some, for example, may be licensed and qualified only to sell funeral cover, but not to manage investments as well. If you need someone to take a comprehensive look at your finances, a planner who can only sell you a policy won’t be useful to you.
Only some planners are able to give thorough advice.
To make sure the planner is competent you can verify their licensing on the website of the FSCA (www.fsca.co.za) by giving the licence, ID number or the name of the brokerage. The FSCA also keeps a register of advisers whose licences a resuspended or have lapsed.
Also ask colleagues or friends for references of advisers who have successfully managed their financial affairs over a period of time. Choose a planner known for having a good understanding of people’s personal needs and financial objectives.
- For more information, visit these websites
• Financial Planning Institute of Southern Africa (fpi.co.za)
• Financial Intermediaries Association of Southern Africa (fia.org.za)
• National Credit Regulator (ncr.org.za)
