Survey reveals low levels of financial planning in SA

A recent survey conducted among middle-to-upper income South Africans by financial services group, acsis, has revealed that 53% of respondents in this market segment make use of a financial planner’s services. According to Andrew Bradley, CEO of acsis, while this figure is encouraging, it is concerning that the survey found that respondents who do not make use of a financial planner tend to rely on sources such as the internet, friends, family, work colleagues and the media as their main resource to put a financial plan in place and implement it. According to the acsis Financial Security Barometer (AFSB), which was launched in August 2011, of the 47% of respondents who do not make use of a financial planner, 29% cite the internet, 33% friends, family or work colleagues and 30% cite financial newspapers or magazines as their primary source of financial information. Bradley says that this is concerning as the advice and products that friends, family or internet sources recommend may not be appropriate for a particular person and his or her unique needs and circumstances. “The local investment regulatory environment is quite stringent and as a result, there are very few ‘bad’ investment products. Instead, the issue is around whether an investment is actually suitable for a particular person’s needs. For example, a retirement annuity is a very good investment vehicle, but if an investor uses it to save for anything other than retirement, it can be problematic as he or she won’t be able to access the funds before the age of 55. In this way, the use of inappropriate investment products can be dangerous and can result in financial instability instead of financial security.” Bradley says that there is unfortunately a misconception with regards to the role of financial planners among consumers. “Many believe that a planner is simply there to assist in the selection of a product or fund as and when the client wants. With this misconception it is easy to appreciate why some consumers believe that they can take care of their own financial planning, as they perceive it to be a simplistic or undemanding role. “A planner in fact plays a vital role in helping clients analyse their current situations and determine how to articulate their life goals. This includes developing appropriate strategies that will give the client the best possible chance of achieving these goals. The planner will also ensure that these strategies are implemented effectively with the most appropriate investments, as well as monitoring them regularly to ensure that they remain appropriate and are on track to achieve the client’s needs.”

He explains that the true role of a financial planner is very similar to that of a sports coach. “Sports coaches set clear, achievable, inspiring goals, build a framework of strategies that relate specifically to a particular athlete and then set actions to take the athlete from his or her current capabilities towards the desired outcome, such as winning an Olympic gold medal in their discipline. In addition, coaches need to understand and incorporate the principles of training, monitor and record progress and provide consistent and positive feedback to the athlete. A timeline is always a factor – there are Olympic qualification dates, athletic tours etc. and a coaching programme needs to be tailored for maximum effect in the given time span.

“In a similar vein, financial planners can help investors set clear and inspiring goals. The most common financial goal that people have in mind is to be able to retire comfortably. Some other goals could be to provide education for children or to start a business. Each set of goals is unique to each person. Once goals have been set, strategies for achieving these goals are developed. Financial planners will then guide investors along the way, providing a sounding board for astute financial decisions. “In financial planning, as in sport, coaching sets winners apart and it is a role that should not be underestimated,” concludes Bradley.