For me using a financial adviser is a no-brainer – I deal with information, that’s how I make wise decisions and in relation to your hard earned money is there any other way? The idea of being financially fit is to ensure that you’re making the right decision for your money and your future and since we cannot know everything – going to the experts make sense.
Firstly I went about evaluating my financial adviser through the following smart questions:
1. What are their certifications or credentials?
This question is to ascertain if he or she is a registered Certified Financial Planner or even better whether they are a fiduciary, which means they have your best interests at heart when it comes to making investment and risk recommendations.
2. How do you charge for your services?
This question is broader and better then saying how do I pay you? It’s important to understand all areas of your financial planner’s compensation, if you don’t ask there maybe potential hidden fees.
3. May I see a copy of a sample financial plan? All financial plans differ according to individuals. What you are trying to see here is how brief or in-depth the analysis is that your FA will conduct.
4. What type of clients do you specialize in and what makes your client experience unique?
With this question you are asking “why do I want to work with you?” Here the planner should give you a mandate or his customer value proposition.
5. What are your measurements for success?
This is a key question because a strong planner will measure success based on how well your plan is progressing against the goals you have laid out and he/she has set up. He will also measure against your age, risk, inflation, benchmarks selected based on your time horizon.
6. How much contact do you have with clients and will I be working with just you or a team?
Again based on their response you can gauge the level of attention, contact you can have with the adviser, and how often you will review your plan together. Remember at the very beginning you need to establish a relationship together hence you may meet more frequently until trust is establish.
7. What happens in the event I become incapacitated?
Even if you can manage your own finances, there will come a time when you aren’t around, either through passing or becoming unable to. A good financial planner will help you with proper estate planning and ways to protect your assets.
8. Lastly in terms of your succession plan, if something had to happen to you what plans do you have in place to assure my needs are met?
Here we are talking about business continuity; to ensure that your financial goals/plans continue uninterrupted should anything happen to your financial adviser.
Some of the Advice from my Financial Adviser: Tembakazi Mbanjwa from Fipro Healthcare & Investment Portfolio Structuring & Management.
1. Prioritize your financial needs
Without a sense of priorities, you’ll have limited success in planning your budget. Decide what you most critically need to spend your money on, and develop a realistic spending and savings plan.
My priority currently is saving – I am doing so by having a Tax free investment with Old Mutual (helpful tax planning – this investment doesn’t get taxed), share with Sasol Inzalo and a Body Corporate bridge Funding portfolio. This will help me buy a home and continue to build compound interest.
2. Clear and avoid unnecessary debt
Financially stretched or not, the last thing you need is excessive debt. This can be defined as debt that you have incurred to buy things that you don’t really need. Through careful planning with your financial planner, try to pay off all your expensive debt such as your credit card or personal loans.
This year – I managed to pay off all my loans and I am working on paying off my credit card.
3. Responsible credit management
A credit card can be a helpful financial tool when used responsibly.
Responsible credit management includes paying your balance in full every month and using your card for needs, not wants. Understand the terms and conditions of your credit card because certain transactions attract interest from the date of purchase.
This is a lesson I’m still learning and I’m definitely working on using my credit card responsibly and mostly for emergencies.
4. Protect your income
Just as you should insure your prized possessions, such as your car or house, it is important to protect your greatest asset, your ability to earn income. This asset can disappear in a flash, for instance if you are disabled in an accident or if you lose the ability to work due to serious illness. Most people think it won’t happen to them, but it really isn’t worth taking that chance. A range of income protector plans or disability cover options are available from financial services providers to safeguard yourself if you are no longer able to work.
With the advice of Tembakazi, I have a life cover that consist of a disability cover.
5. Plan your spending
Plan purchases. Only buy what you planned to buy. Make a shopping list and stick to it so you don’t overspend. When buying big, expensive items, do an online search for price comparisons. Always ask yourself: do I really need this? If the answer is no, then put the item back and walk away.
Planning my spending as help never go into a grocery store without my list , when buying big items like a fridge or a bed which are my spending plans in the next two months – this was something planned earlier in the year, so I have been saving for them and would rather buy cash.
6. Plan for the longer term
Once you’ve put everything into place, set your vision on the longer term. It’s well and fine to plan one year in advance, but to really achieve your goals, you need to think further ahead.
My long term plan are having a home, planning for kids even when I don’t have them currently – I feel financially I have to be somewhat prepared. Planning for my retirement – your retirement and provident fund is no longer sufficient – so building my investment portfolio is the way I am working on that.
Words of wisdom:
“The most important thing is that you review your financial standing annually and your portfolio as a whole, this ensure you are covered sufficiently and allows you to see what are the next steps to take in improving your financial fitness “ – Tembakazi Mbanjwa from Fipro Healthcare & Investment Portfolio Structuring & Management.