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Personal investing

Seek financial advice to help you meet your financial goals

The spotlight falls on the importance of having a financial plan during Financial Planning Week, taking place from 7 to 11 October 2019. With this in mind, Tamryn Lamb, head of Retail distribution, shares some of the things you should consider when getting a financial adviser to help you plan for your future. You can also learn more about the benefits of independent financial advice, and how it can prevent common investing mistakes, by watching this five-minute clip.

Many investors underplay the importance of financial advice often to the detriment of the performance of their portfolios over time. A good, independent financial adviser (IFA) can dramatically improve your financial outcomes by guiding your financial planning decisions over your investing journey and ensuring that you remain committed to your goals.

An independent adviser has the objectivity and experience to help you navigate the inevitable twists and turns in life to meet your financial goals, while helping you avoid the pitfalls of investing on your own.

How to choose a financial adviser

A key consideration in selecting an adviser is independence.

An independent financial adviser plays an important role in helping you make decisions that are right and tailored for your circumstances. We believe the best form of advice, therefore, is when it is agnostic of the underlying service or product provider as the adviser is not incentivised to recommend a specific product.

Trust is a crucial component and foundation of the long-term relationship you will form with your adviser. This is relevant throughout the planning process and journey but is particularly important when times get tough and hard decisions are required to stick to your planning goals. Given this important relationship of trust it can help to get a recommendation from a person whose judgement you value – like family or a good friend. Alternatively, you can turn to the Financial Planning Institute of Southern Africa (FPI) for help.

How to prepare for your first meeting with your new adviser

Financial advisers are best able to help you when they have a clear picture of your current financial situation. Being prepared for your first meeting, which includes knowing what you want assistance with, will help the IFA structure a plan which is suited to your individual goals and circumstances. Ultimately, the first step in planning for where you want to go, is knowing where you currently stand.

Consider these four financial aspects before meeting with an IFA:

  1. Establish a view of your current financial position: Do you measure the money that flows in and out of your bank account? Do you have a clear picture of your spending patterns and a holistic view of all your assets and liabilities? By monitoring and tracking your spending you can identify and curb bad spending habits, which will allow you to create more room to save. Going into the meeting with your chosen IFA with a budget will help them understand which expenses you can cut, and how you can save more. Of course, many people don’t have a budget – if you don’t have one you can ask your IFA for assistance to create one.  
  2. Identify your short-, medium- and long-term goals: What do you aim to achieve financially? Do you need to save for retirement, plan your child’s education or create a “fun fund” to pay for a holiday? Spend some time thinking about the things you really want or need and identify how much money you can save towards each of these goals. 
  3. Understand your risk appetite: You need to figure out how much risk you are prepared to take on to achieve your financial goals. Think about how comfortable you are with your investment moving both up and down over the short term in order to achieve long-term returns. The ups are great to experience, but they do come alongside the inevitable down periods. Understanding how you might react in the down periods will help you establish your tolerance for risk. Your adviser will discuss this with you, and your input will help your adviser make decisions you are comfortable with – and can stick to.
  4. Evaluate your debt: If you are struggling with paying off any large amount of debt, it may first make sense to speak to a qualified debt counsellor, one who is registered with the National Credit Regulator (NCR). Include this as a priority in your financial planning.

After you have had your first session with a financial adviser, you should have a better idea of your financial circumstances, what your long-term goals are and how the adviser can help you in achieving them. It is not impossible to invest on your own, but it can be a lonely journey. A trusted, independent adviser has the objectivity and experience to help you meet the full range of challenges you might face and help you stay on track.

Before agreeing to contract the services of an IFA, consider the costs, which are always disclosed clearly. As with most services that are provided, investors should also consider these costs against the considerable value that can be created over the long term.

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