Financial Planning in South Africa – The Importance of the initial appointment

The Financial Needs Analysis - Estate Planning and Wills

In my previous article, Returning to South Africa – Financial Planning explained, I mentioned the 6 steps of financial planning in South Africa. These steps were researched and implemented by the FPI as a guideline and methodology for advisers.

The thinking behind these steps was to ensure that the clients’ needs are always held as central in the mind of both the client and the adviser. Financial planning is, inherently, a very private matter for all of us, and the thought of baring all of your private finances to, most often, a complete stranger, is daunting. However daunting  it may be, having a professional financial adviser guide your thinking and giving you appropriate advice is paramount to reaching your financial goals.

The 6 steps are all centered around you as client  and around the importance of collecting, processing, presenting and advising on the result of the information gathered from you. The most important aspect in this process, is that the advice must always be specific to your information and circumstances. It must always be based on information provided by you, processed in such a way that it makes sense to you, and advised upon in a way that will benefit you.

Taking all of the above into account, it becomes clear that the initial appointment between you and the adviser is of utmost importance because he can, and may only, advise you on information that you have provided. It is critical that expectations are set with regards to what services and advice you are looking for, and how the adviser will go about collecting your specific information and processing it with your expectations in mind.

Holistic financial planning is a term used to describe the interconnectivity between all the various aspects of personal finances. It is used to describe how one aspect of the planning process will inevitably influence the whole. Holistic financial planning will always be part of a financial needs analysis report (FNA). The FNA report seeks to present to you not only the aspects of your financial matters that you required advice on, but also how it will affect your personal finance as a whole. Very often you will seek advice on a specific aspect of your finances, be it investments, retirement, risk insurance etc. The FNA must not only provide the advice you require, but also show how it will influence all the other aspects of your financial situation.

As with any business, irrespective of the industry it operates in, advisers can either focus on one specific aspect of financial planning, or be a holistic financial adviser. Advisers can structure their business in such a way as to focus only on managing investments for their clients, to solely focus on building a medical insurance or short term insurance business or to be a holistic financial planning business. However, it is important for you, as a client seeking financial advice, to know right from the start, what type of adviser you are working with. It is the adviser’s responsibility to share this with you, and to make you fully aware of what he can and cannot do.

Holistic financial planning in South Africa will typically focus on the following aspects:

  • Estate planning, which includes estate liquidity, debt provision, capital provision and wills and trust planning
  • Retirement planning, which includes pension/provident funds, retirement annuities, QROPS and investing for retirement
  • Investment planning
  • Cash flow and income tax

With all of the above-mentioned aspects, it is of utmost importance to express, explicitly, what your requirements and expectations are. Conversely, it will be the adviser’s responsibility to manage your expectations and to ensure that all the information that he will need to prepare an FNA, is discussed and received from you. Because the information that you provide will form the basis of the FNA and the corresponding advice, it is imperative to be open and absolutely honest about your circumstances.

Schonbergtrust Financial Brokers
Tel:  021 914 1047