Anchored or drifting? A catalyst for change for advisers and clients

Consumers avoid seeking financial advice for a number of reasons. They are embarrassed by how neglected their finances seem and concerned over the belt tightening required to rectify their plight. Are their concerns justified?

Individuals who overcome their fear and seek out financial advice experience overwhelming relief. They also discover that financial solutions are easier to implement than anticipated. The challenge is for financial advisers to reach these clients before their finances get out of hand, by encouraging both potential and existing clients to seek out financial advice at an early stage.

Advisers can grab their clients’ attention by creating awareness of how individuals rank on a scale of financial wellness – in terms of their lifestyle and personal financial goals – relative to their peers. This comparison works because competition is a powerful and instinctual motivator!

The Momentum Financial Wellness Index, in collaboration with UNISA, will raise awareness of the importance of financial wellness. The index also empowers financial advisers to better understand and interpret the state of financial wellness of local households.

Although the index reflects an overall view of the "average” South African household, with reference to various peer groups within the sector, it contributes significantly to an individual’s awareness of their financial wellness too.

Individuals can visit the Financial Wellness page on the Momentum website (www.momentum.co.za) and complete a quick tool to see how their peer group fares against the general South African population. It is a simple process that requires an individual to provide their age, education level and employment status.

It is hoped this knowledge will become a catalyst for change, providing a starting point for consumers to seek professional financial advice in order to receive a holistic and considered long-term view of their financial wellness.

The index also highlights the need for all individuals to take responsibility of their financial wellness. Having a solid, holistic financial plan was identified as one of the most important differentiators between those that are successful versus those that are vulnerable or unstable in their financial outlook.

The team at UNISA chose understandable and universally accessible terminology to illustrate the categories of financial wellness. Individuals can position themselves in either the "Well” or "Unwell” category and further qualify their unique financial situation with the terms "Anchored” or "Drifting”.

The first Momentum Financial Wellness Index reveals that:

• 4.8% of the population fall into the Anchored Unwell category. Such households are deeply rooted in a financially unwell position and have little chance of improvement without major outside assistance.

• 48.5% of the population fall into the Drifting Unwell category. This represents a household that is unstable and leaning towards negative financial circumstances. Positive financial influence can easily move this household to a financially Well category.

• 30.5% of the population fall into the Drifting Well category. Households in this group are unstable with the potential to drift downward into a worse financial position. Given the right financial advice this grouping can enter the financially stable position.

• 16.2% of the population are Anchored Well. Households in this group are described as "firmly financially well” – the classification all household should aspire to.

Momentum has a strong relationship with financial advisers and believes in collaboration and partnership in order to deliver the best possible solution for clients. The index is an innovative tool that enhances the skills and services of the advisers the group partners with.

The index confirms that the majority of South African households are in an Unwell financial situation. It is hoped that consumers – empowered with information of their financial status – will actively seek out the assistance of professional financial advisers.

Knowing, acknowledging and catering for the needs of individuals will enable financial advisers to take their relationships with their clients to the next level.