| Now that the silly season is approaching fast, I thought it might be a good time to get ducks in a row for next year. Consolidation In our busy lives, it is often useful to have all our investments and policies summarised on one page, and if you have bits and bobs in Retirement Annuities (for example) on a multitude of platforms, then putting them into one Retirement Annuity (RA) might be a good idea. This comes with caveats. If you have them on an insurance platform, including the big D, then there may be ‘early termination penalties’. I don’t make friends in certain corners of this industry by saying this, but they are caused by brokers taking up to 25 years of commission on those RA’s. Much less prevalent today, but I still come across it. If you have half a dozen RA’s, I am willing to bet that some broker in your past wanted ‘new business’ with more upfront commission.  Consolidation doesn’t have to be at the expense of ‘diversification’. If you’ve diversified your investments with different advisors or different platforms – I get it. When it comes to your wealth, you need to find a trusted advisor, and that could take time. In your early years, finding someone you trust to take you through your wealth journey and it could take time and a series of upgrades. Even so, even if you’re just starting out, at least find an independent advisor who uses a wide range of service providers (often on LISPs) for your investments – they can make their comm from your risk and life cover while you build your wealth without penalties that only benefit one person (not you). Here’s another tip – if you’re starting your wealth journey but your parents have found a good advisor, get under that umbrella if you can. Advisors often want to help the children of their clients, especially if they’re going to be the ultimate beneficiaries of their wealth. There comes a time, though, where you can save yourself a lot of time (and angst) if you consolidate as much of your wealth and risk portfolio with one advisor (risk, life policies and investments). They all impact each other, and grudge purchase or not, there are some risks you really do need to mitigate while you build your wealth. There are advisors, they may even call themselves independent, out there who won’t look after the ‘unsexy’ side of the business – life, medical aid and short-term insurance, etc. Sure, they tout themselves as experts – but siloing the various components of your wealth can lead to a ‘pick me’ competition between the advisors, each of whom thinks their silo is the most important, whereas the holistic, future financial plans of the individual should take priority. In order to be most effective, I have decided to partner with carefully chosen life and risk advisors or brokers, who act in a paraplanning role, implementing my recommendations, but freeing me up to do the critical thinking and problem-solving side of the profession. Win-win. No silos, big picture clarity and a single objective – your wealth.  Understand where your wealth is and isn’t protected. In an era where scam artists are found around every corner, you are quite right to worry that your funds are safe, but there are some things you can do to help with that. First, check that the advisor is registered with the FSCA on their website and approved to give advice on the category of applicable investments. As a quick guide, Category 1 advisors are registered advisors only, whereas Category 2 allows for the firm to act as an asset manager. Your investment funds do not go into the Financial Services Provider’s bank account, and never into an individual’s account, even if they work for the FSP. FSPs have ‘custodial banks’, which have no links to that FSP that they work with into which you deposit funds. This is a second layer of protection for consumers. Formal pension funds have an additional layer of protection from the Pension Fund act (and they are also protected from creditors). Make sure you know where all your investments are, especially when it comes to retirement funds that might have been ‘preserved’ elsewhere or left with the company. Funds that go into ‘suspense’ accounts and are inactive for long periods of time are ripe for ‘insider job’ scams – people who can get around the protection of the Pension Fund Act. How do they do that? They clone your ID and Proof of address (available from your dormant file), open a new bank account in your name (usually online) so they have ‘proof of banking’, and then they just submit a withdrawal request using the FSP’s forms and procedure (but now with your stolen identity). They might even add a step of using the above processes to change the email and cellphone number first. Consolidating these various funds can be done at no cost using a Section 14 transfer. It is much easier to keep an eye on one investment than a half dozen. If you are contributing to a company pension and do not have (and use) online access, make sure that the proceeds are, in fact, being paid across by the employer. Do not take the deduction on your payslip as proof (as unfortunately, hundreds of employees found out when they tried to withdraw from the 2-pot system last year). You need to get an annual member’s certificate from the FSP, but I would go as far as asking proof from HR. Funds in good standing must provide members with investment allocation information in terms of the Pensions Fund Act. If you are concerned, request the latest investment report or audited annual statements directly from your fund provider and administrator. Get yourself organised, have all your policies, medical aid documents, investments and other important papers in one place. Print out and file statements and updates regularly. (My RedFile template that helps with this is still free on request). Investments are never safe from the all-too-human impulse to allow greed to cloud your judgment. If it looks too good to be true, it probably is. Keep tabs on what ‘market-related’ returns really are by listening to podcasts, reading respected newsletters etc. I know, it can be boring, but knowledge is one of the best safeguards against being scammed. (We put out a layperson-friendly newsletter weekly, let me know if you want to receive it). The one thing I have been doing for years is a ‘personal and business plan’ for the following year. This isn’t just a New Year’s resolution, but a financial projection backed with an action plan on just how I am going to achieve it. I am going to be covering this and other topics for getting your ducks in a row for next year over the next couple of weeks. |
| Articles and Blogs: Abdication or diversification? NEW Carbo-loading your retirement NEW Spoiled for choice Who needs a plan anyway 8 questions you need to ask about retirement What to do when interest rates drop How to survive volatility in your investments What to do when interest rates drop Difficult Financial Conversations Financial Implications of Longevity Kick Start Your Own Retirement Plan You matter more than your kids in retirement To catch a falling knife Income at retirement 2025 Budget Apportioning blame for your financial state Tempering fear and greed New Year’s resolutions over? Try a Wealth Bingo Card instead. Wills and Estate Planning (comprehensive 3 in one post) Pre-retirement – The make-or-break moments Some unconventional thoughts on wealth and risk management Wealth creation is a balancing act over time Wealth traps waiting for unsuspecting entrepreneurs Two Pot pension system demystified Cobie Legrange and Dawn Ridler, Rexsolom Invest, Licensed FSP 45521. Email: cobie@rexsolom.co.za, dawn@rexsolom.co.za Website: rexsolom.co.za, wealthecology.co.za |