A trail of sound financial advice

01 April 2015 FAnews

The importance of investing has often been highlighted, and is not a decision which should be taken lightly. This shows the value of proper advice and the need for advisers to go into great detail regarding all implications relating to the tax changes which took effect on March 1.

FAnews asked a few companies why they believe advisers play an important role in giving advice on Tax-Free Savings Accounts (TFSAs) and why they should get involved.

Why should advisers get involved?

According to Craig Sher, Head of Product Development and Research, at Discovery Invest, investments need to be monitored on an on-going basis and advisers are often well equipped to do this as markets shift direction. The tax-free savings account makes provision for the investor to withdraw the investment at any time, however, leaving money invested and earning compound returns provides a significant long-term benefit. Advisers can ensure that tax benefits are maintained and advise clients accordingly so that savings are not withdrawn prematurely.

René Grobler, Head of Investec Cash Investments (a division of the Investec Specialist Bank), mentions that in the next few months clients will be asking advisers for advice in terms of finding the best solution for them as part of their investment portfolios.

In this competitive market however, there are a vast amount of products available to clients which may cause confusion. Gareth Johnson, Head of Retail Business at Investment Solutions, says that a financial adviser will, through a proper analysis of the investor’s individual financial needs, objectives and expectations, be able to offer proper guidance. This will allow the investor to make an informed decision on structuring his or her portfolio in the most tax efficient way.

Embracing changes with open arms

Advisers should get involved to assist in positioning the various elements of tax planning. This will help clients make the correct fund selections to meet the risk and return requirements that they may have, says Mickey Gambale, Head of Discretionary Investment Solutions at Momentum Investments and Savings.

Sinenhlanhla Nzama, Investment Marketing Manager at Old Mutual, mentions that many customers already have other investments in place, such as retirement annuities and unit trusts, and would need advice on what to do with these investments in light of tax-free savings. The fact remains that retirement solutions, such as retirement annuities and employer retirement funds, remain much more tax-efficient and ideal for retirement saving. Customers will also need to be aware that not all tax-free products are equal, for example the adviser should outline that with life wrapped tax-free savings you can nominate beneficiaries and enjoy some protection in case of insolvency.

Tax-free unit trusts should be considered as part of an individual’s holistic financial plan, to weigh up the benefits compared with other tax-efficient solutions like contributions to their employer’s retirement fund and retirement annuities, advises John Kinsley, Managing Director at Prudential Unit Trusts.

Not one size fits all

According to Rupert Giessing, Head of Product Development at PSG Wealth, financial advice is complex in nature and no two individuals have the same circumstances or objectives. Financial advisers can help clients to align investments with others in their portfolios, and to make sure that their investments are collectively positioned to target their investment goals.

The use of the product however, needs to be managed with reference to the client’s holistic financial plan, says Kavir Ramjee, Product Development Actuary, Sanlam Personal Finance. Clients need to make sure that their savings are appropriately apportioned between the various savings products on offer in the market. Each of these vehicles has their own pros and cons, and a financial adviser is ideally placed to make sure that each of these products is used appropriately.

Clients need to be informed to make sound financial decisions. This is where financial advisers play important roles to ensure clients are fully educated and aware of what products are available to them.

It is always wise to seek expert advice when looking to save or invest in the long-term. A financial adviser will be able to assess a customer’s financial needs and advise on the best financial solution to meet the customer’s individual needs, concludes Sibongiseni Ngundze, Head of Retail Banking at Standard Bank.

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