Do you need a financial Advisor?

If you have never sought the help of a Financial Advisor, you may be wondering whether there is any value in seeking advice from a professional, or if you should go at it alone. Not every investor may need, want or be able to afford an advisor, but there are times when seeking professional advice makes all the difference.

Good Financial Advisors play an important role in helping you make decisions that are right for your circumstances.

While many investors are reluctant to take on the advice fee, advisors can make and save you money in the long run, earning their keep time and again. It is not impossible to invest on your own. However, an advisor has the objectivity and experience to help you meet the full range of challenges you might face and help you stay on track.

A financial planner is a professional who helps you organise your finances and projects the results of your savings and investments so you can see how well prepared you are for retirement. They also help you make decisions with your money that will help you reach your financial goals as efficiently as possible.

Financial Advisors help you create a plan for meeting your financial goals and guide your progress along the way. They can help you save more, invest wisely or reduce debt. The services provided by financial advisors will vary based on the type of advisor, but generally speaking, a financial advisor will assess your current financial situation — including your assets, debts and expenses — and identify areas for improvement.

A good Financial Advisor will ask you about your goals and create a plan to help you reach them. That may mean calculating how much you should save for retirement, making sure you have an adequate emergency fund, offering tax-planning suggestions or helping you refinance or pay off debt. Financial advisors also help invest your money, either by recommending specific investments or providing complete investment management.

In some cases, you can choose which services you want or need based on the type of advisor you select. For example, a traditional in-person advisor will likely offer personalised, hands-on guidance for an ongoing fee.

Financial planning looks at a person’s overall financial picture. A financial planner will often ask a prospective client to fill out an extensive questionnaire in order to understand his or her financial needs and goals. The planner will usually put together a detailed, short-term 5-year plan designed to improve the client’s overall financial position. That may be followed by a long-term plan, along with suggestions about how to save and invest for retirement and a child’s university education at the same time. The planner will also look at ways to reduce current and future tax liabilities and protect assets by having the proper life, health, disability and long-term care insurance coverage in place. Finally, he or she may offer suggestions on estate planning

There are a number of key areas in which a Financial Planner can add value to your wealth management strategy. The extent to which you engage with your financial planner in these areas will depend on where you are on your financial journey. As trite as it may sound, two important issues that a Financial Planner should bring for those seeking financial independence for the future are the ‘sleep at night’ factor; and ‘peace of mind’ for the investor and their dependants.

There is one matter that is often expected of a financial planner that cannot be guaranteed – and that is to have continuous growth in the value of portfolio assets! Your Financial Planner will not be able to influence the performance outcomes of the investments made: they will be able to ensure that the outcomes your portfolio achieves will do the best that it can to continuously work towards the achievement of your investment/wealth management goals, within the constraints of your financial resources and the risk tolerance you are assessed to bear.

By using a Financial Planner to guide and assist you to manage your wealth and financial strategies, you should be able to ‘sleep at night’ with the confidence that your portfolio is doing all that it can to achieve the identified goals – and you and your ‘family’ should have the ‘peace of mind’ that all will be well for those whom you care for/ about regardless of any interruptions to your health and well-being.

Choose a financial planner who has experience dealing with clients in similar circumstances to yours. You’ll also want to make sure that the financial planner has your best interests at heart, and that he or she isn’t selling you products that are not suited to your needs. Interview prospective financial planners and ask them about credentials, management strategies, and history of performance. Call up past clients as references.

1. You want to put a plan in place, but you have no idea where to start.

A financial adviser can help you develop a long-term plan that meets your objectives. If you have money to invest take the time to consider your long-term needs. Do you need to save for your child’s education? Do you need retirement savings?

A Financial Advisor can help you shape all your future commitments into realistic goals and will also help you to keep you on track in uncertain times.  Remember the golden rule: if your circumstances don’t change, your plan shouldn’t change.


2. You need to choose an investment product, but you suffer from analysis paralysis.

There are so many different products available that the choice itself can be a huge barrier. Different products suit different investment objectives – some have tax benefits and others have restrictions that you need to be aware of before committing. It’s important to read and understand the fine print. While researching every product that is available, is not impossible, it can be overwhelming and time-consuming. An Financial Advisor will assist you in working through the options and making choices suitable for your unique situation


3. Your life circumstances have changed, or are about to change.

Getting married or divorced, having children, inheriting a large sum of money, or retiring – different events introduce new financial challenges. Thinking about how to manage your money during each of these life-stages can be confusing, and balancing your responsibilities can be tough. Financial advice is crucial in order to navigate the “how do I…?” questions that inevitably arise during any of these big changes.


4. You are changing jobs and have no idea what to do with your retirement ‘windfall’.

If you are changing jobs, make sure you preserve the retirement savings you have built up. If you do not, your retirement plans are likely to suffer a setback. Not only do you land up spending the capital you have accumulated, but you give up the future compound interest. You will also be taxed on the withdrawal amount, according to tax tables

Example: If at the age of 35 you choose to take your retirement savings in cash when you resign, as opposed to preserving it, you will have 40% less to live on when you retire. Put differently, assuming you take 70% of your final salary (escalating at inflation) as a pension when you retire, your pension will run out 12 years earlier than if you had not taken your retirement savings in cash when you left your employer.

A financial adviser can help you stay on track and deter you from spending your retirement savings when you change jobs.


5. You are drowning in debt.

If your biggest financial need is paying off debt, it may be premature to seek the services of a financial adviser.

First, ask about his or her experience with people in a similar situation to yours. Second, ask about education and certifications. Third, ask about the breadth and depth of products offered. Fourth, ask how he or she is compensated for services. Finally, always be sure to check that the financial planner is fully licensed and in good standing. If the financial planner is a CFP®, visit the Financial Services Conduct Authority website to run a quick check.

There are a number of different financial planning certifications. While a financial planning professional can have any of several designations or certifications, at the very least you should make sure that he or she is licensed and in good standing with the licensing authority. 

Three of the most common designations are CERTIFIED FINANCIAL PLANNER®, Chartered Financial Consultant, and Registered Investment Advisor.

A CERTIFIED FINANCIAL PLANNER® (CFP®) has competency and experience in all areas of financial planning. A CFP® has completed courses of study in over 100 topics of financial management including equities, taxes, and retirement planning. He or she must also follow the CERTIFIED FINANCIAL PLANNER® code of ethics. A CFP® has a fiduciary responsibility.

While your financial planner may make a different recommendation based on your particular circumstance, it’s a good idea to see him or her at least once a year. You should also consider making an appointment in anticipation of life-changing events such as marriage, the birth of a child, divorce, or after inheriting a large amount of money.

Financial planners are paid on either a commission or fee basis, or sometimes a combination of the two. Commissions are usually one-time charges based on each product sold or for each transaction. Fees can be based on the percentage of assets under management, an hourly rate, or even a flat fee.

In accordance with the tax law relating to retirement annuities, a retirement annuity is not a savings account and you cannot simply withdraw money when you need it. In fact, unless your retirement annuity fund balance is below R7 000, you cannot access this money before you turn 55.

You may only withdraw from the Fund if:

  • The total investment value of all your Retirement Annuity investment accounts is less than R7 000 and you’re not contributing to the Fund anymore.
  • You have emigrated from South Africa and your emigration has been approved and recognised by the South African Revenue Services and the South African Reserve Bank.
  • You are a non-resident who has left South Africa because your work or visit visa has expired, as contemplated in the Income Tax Act.

Choose a financial planner who has experience dealing with clients in similar circumstances to yours. You’ll also want to make sure that the financial planner has your best interests at heart, and that he or she isn’t selling you products that are not suited to your needs. Interview prospective financial planners and ask them about credentials, management strategies, and history of performance. Call up past clients as references.