Leaps and bounds to financial wellness

Regard Budler, Managing Executive: Client Solutions at Momentum

South Africa’s debt to GDP ratio has been growing for some time because of overspending. Consumers have been running up debt and plundering into retirement savings.

Consumers face financial vulnerability because of too much debt, spending too much and bad financial planning.

Tackling financial literacy is one of South Africa’s most important challenges and financial advisers have a key role to play in overcoming this.

South Africa is one of the most indebted nations and the latest National Credit Regulator data indicates that 40% of consumers with any kind of credit have impaired status which means they have, in some way, failed to meet their obligations.

Lack of a plan

It is no surprise that the 2016 MMI Consumer Financial Vulnerability Index shows that South Africans are feeling ‘very exposed’ in terms of their finances.

The index is a powerful window into the psyche of consumers and how vulnerable they are feeling in relation to their income, expenditure, savings and debt servicing. With this insight into the South African consumer, the financial services sector is able to use this as a tool to understand client needs and design and develop the most appropriate solutions to enhance financial wellness.

The same index also offers clear direction towards a practical solution because it reports the lack of a plan as the primary source of financial concern for South African consumers.

This is where both financial services providers and financial advisers can get involved. If the majority of South Africans simply can be persuaded to make a very basic and achievable plan for their finances and then stick to it, we would be taking a huge step towards financial wellness.

Individuals caught in a web of debt are often emotionally and mentally stressed which easily impacts on their physical health and their productivity. However, knowledge is power and as soon as someone gains an understanding of the basic issues and learns some simple practical solutions they can start to regain a degree of control over their finances and their lives.

Utilising user friendly programmes

Momentum Motheo Financial Dialogues was launched in a collaborative effort by the MMI Foundation and Momentum to address this issue in the workplace. It is a user-friendly multimedia programme for communities or businesses which provides the basic tools to improve knowledge about payslips, insurance, retirement and debt. The material is available in mobile form via Facebook and WhatsApp.

Financial advisers in the group environment can play a part in persuading employers to use programmes like Momentum Motheo Financial Dialogues to improve their employees’ lives and to lift productivity as a result.

Advisers can also make a big difference in the individual client context by constantly implementing basic steps:

• Talk about a plan before talking about products or solutions;
• Tackle expenditure honestly and realistically - look for ways to save and then help build a budget;
• Make consolidating debt a priority;
• Know the law on usurious debt and illegal loans and help clients to re-structure or shed those burdens;
• Use clear language and keep checking that clients have understood everything; and
• Put the plan in writing and update it on a regular basis.

Making a huge difference

This process is difficult because financial matters can be a taboo topic for many in South Africa and that compounds the problems. The programme therefore encourages participants to take discussions about money further within their families and their communities.

It is believed that just getting a conversation started and giving everyone a clear picture of their position will make a huge difference.

It is our responsibility across the industry, both professionally and for the future of the nation, to make sure that this happens.