Spotting the opportunities for financial advisers in a turbulent economy

Etienne Gouws, CEO of Momentum Intermediary Solutions, says that South African customers continue to feel the pinch due to the rising cost of living, but this does not mean that there aren’t opportunities for Independent Financial Advisers (IFAs) to grow their businesses and flourish in a turbulent economy.

“Petrol is at an all-time high, the Consumer Price Index reached 4.6%, and healthcare costs consumers 8.6% more than a year ago. As the industry is entrusted with helping clients achieve their goals, IFAs have a responsibility to help South African consumers to take control of their finances. Future-focused IFAs will also be able to spot the opportunities for growth,” says Gouws.

Helping consumers save more wisely

While 16 million South Africans have savings accounts, *research figures show that 40% of this money sits in accounts that offer very low interest rates, if any at all.

“IFAs are in a key position to help those who have invested in low interest bearing accounts, to earn more on their savings. These people can be earning better returns on their savings each year simply by switching to funds that are better suited for their individual needs,” says Gouws.

Offshore investments

An increasing number of consumers are pursuing offshore investments. Only 22.8% of Momentum clients’ investments are invested offshore, despite industry recommendations that investors should look into holding at least 30% - 40% of their total investment portfolio offshore to protect them against an erosion in local purchasing power.

“Momentum’s relationship with our offshore providers gives our IFAs the ability to offer offshore investment solutions to their clients so that when the currency decreases, their offshore basket will rise in value. Investing abroad can be a daunting task, which is why we have highly skilled and knowledgeable international specialists who are qualified to give advice on offshore investments. These specialists can accompany our IFAs to clients meetings as and when required,” says Gouws.

Helping consumers out of debt

40% of consumers who have been granted credit are currently in arears having missed three or more consecutive payments. Gouws says financial advisers can play a key role in helping these people solve their financial problems and reach their financial goals by providing their client with a financial plan.

“Only one-third of South Africans have a financial plan. Setting a financial plan, and sticking to it, can help consumers to get out of debt. Financial advisers actively need to seek to help the two-thirds of the population that have yet to develop a financial plan. This is a fundamental starting block to financial success,” says Gouws.

Momentum’s research shows that households that make use of a financial adviser save double (8.5%) the amount compared to those without a financial adviser. In addition, households with a financial adviser accumulated four times the assets than those without a financial adviser, over a 15-year period.

“We all need a financial adviser who we can trust. Someone who will partner with us, listen to our needs and understand our individual goals. Nobody just wants to be sold a product; we want a champion to help us understand how we should set financial goals, and the journey to achieving them.

“Momentum believes in the future of financial advisers and in the value of financial advice. The successful IFAs of the future are the ones who are focusing on building meaningful, long-term relationships that are mutually beneficial to all parties,” concludes Gouws.