Financial advisers could be your lifeline

This is according to a Consumer Financial Vulnerability Index for South Africa completed by the Bureau of Market Research at the University of South Africa in collaboration with FinMark Trust.

About 63.8% of consumers surveyed were exposed to financial vulnerability because of too much debt, while 60.3% spent more than they earned and the plight of 46.6% was attributed to bad financial planning.

The findings point to low levels of personal financial discipline. Almost 45% of the respondents surveyed indicated the amount they spent was restricted by the amount they could borrow. More than 40% even indicated they often had problems making ends meet.

The survey is a clear indication that, while everyone would like to become rich and achieve that status within 20 or 30 years of income, most consumers are set to retire with inadequate or very little wealth because they started saving late, saved too little or did not save at all.

Boitumelo Mothoagae, financial adviser and head of customer retention at Liberty, dismissed any chance that incompetent financial advisers, bad products or even volatile markets were the reasons for many consumers achieving minimal or zero wealth later in life.

Long-term savings plan

She put the blame on the consumer and explained that the single biggest obstacle to building wealth was commitment to a long-term savings plan.

"If you can get this right, you will achieve significant wealth," she said.

The survey also found that though consumers generally believed saving money regularly, especially for emergencies and retirement, is important, statistics by the Reserve Bank showed they saved very little.

Mothoagae noted that some of the survey's findings point to the common difficulty and the often daunting task faced by many people when attempting to navigate the world of investment on their own.

Mothoagae stressed that making an informed financial decision required a range knowledge only a professional financial adviser can offer. She gave five reasons why a financial adviser is essential, not only to business entities, but also to individuals:

• Reliable, timeous information and advice;
• Financial advisers are trained, qualified and have access to the most up-to-date information in order to ensure their clients always know what's relevant;

• Comprehensive financial assessment and planning.

Financial planning is not simply about where to invest your money. It also involves decisions such as whether to buy a car, save or invest, or how to pay for your child's education in the most tax-efficient manner.

It involves estate planning, tax planning, retirement planning and risk management. All these pieces have to work together and financial advisers understand how to do that.

She says financial advisers have relationships with companies they invest your money with. They are your middle man and make sure that their clients stay on track through continuous contact and reviews.

Once a plan is implemented they want to make sure that life changes are all taken into account and will recommend and implement changes to your plan accordingly. This helps clients remember their overall financial objective and the process to reach it.

Mothoagae says that financial advisers are trained to see the gaps in their clients' financial plans well before the client does and they can help plan accordingly before it is too late. She says advisers have the tools and knowledge to prevent you outliving your retirement.

Source: Sowetan via I-Net Bridge