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Financial Planning Institute Gears Up To Promote South Africans’ Financial Health

06 June 2012 The Financial Planning Institute of Southern Africa (FPI)

Moeletsi Mbeki, one of South Africa’s most respected economic and political commentators, has drawn a disconcerting picture of how easily South Africans get caught in a debt trap.

He says the country’s high unemployment, coupled with high poverty levels, puts an added burden on those lucky enough to have an income.

“Faced with this double-burden, what do the employed do? They borrow. They borrow to pay their taxes to keep the government operating, they borrow to pay school fees for their children, they borrow to pay for toll roads,” says Mbeki. South Africa’s household debt to income ratio stands at a shockingly high 79 percent.

Even the government is worried by the high debt levels. Delivering his Budget speech in February, finance minister Pravin Gordhan, underlined the crucial importance of personal financial planning. He committed the government to developing a series of white papers aimed at promoting household savings and reforming the retirement industry.

Meanwhile, the National Credit Regulator (NCR) has warned that unsecured credit extension was escalating at worrying levels and is investigating the trend. The regulator says the unsecured credit market ballooned from R21, 2billion in September last year to R26, 45 billion in December. Such loans are quite expensive and can attract interest of up to 32 percent. According to the NCR, 6000 South Africans apply for debt counselling every month.

“Currently, the country’s household saving rate of 16 percent is far too low compared to other emerging markets. The country has had a negative savings rate since 2005,” says the Reserve Bank. Godfrey Nti, CEO of the Financial Planning Institute of SA (FPI), says this unseemly scenario highlights the crucial importance of personal financial planning. “People who battle to escape the debt trap need the best available advice possible. If they’re ever to overcome the stress of living with debt they cannot manage, they should use a professional financial planner who will ensure that this problem is solved as part of a bigger financial plan. They simply cannot afford to make mistakes.”South Africa, he says, has a dire shortage of CERTIFIED FINANCIAL PLANNER® professionals. “There are approximately 100000 financial advisors. But, less than 5 percent of them are CERTIFIED FINANCIAL PLANNER® professionals.”

How can South Africans be assured they are getting sound financial advice to guarantee them long term financial security and independence?

Addressing this issue, the Financial Planning Institute (FPI) today unveiled its new strategy to provide solutions to address the challenge of availability of qualified professional financial planners as well as introducing the FPI’s new consumer advocate who aims to provide meaningful advice and information to consumers.

While South Africa has approximately 100000 financial advisors, less than 5 percent of these individuals are CERTIFIED FINANCIAL PLANNER professionals.This begs the question: “Are South Africans getting sound financial advice to guaranteethem long-term financial security and independence,” says Nti.

In an effort to providing consumers with sound advice and improving professionalism in the industry the FPI will be introducing for the first time, a professional designation for financial advice that can be attained by financial advisors on completion of a specifically designed FPI board examination. The FINANCIAL SERVICES ADVISOR™ /FSA™ certification effectively enables individual financial advisors to once again differentiate themselves as well as provide trusted expert advice to consumers

Further, to the introduction of the new professional designation (FSA™), the FPI also realises that consumers are faced with many challenges including lack of information or understanding of financial planning issues. As such, the FPI today launched a new consumer advocacy programme, headed by well-known CERTIFIED FINANCIAL PLANNER professional , Paul Roelofse. Roelofse will continue to work with the FPI in driving consumer education about their real financial needs and the right to professional financial planning. The new interactive website will provide consumers with information and answer frequently asked questions about financial planning.

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