| Occasionally I am asked straight out what the value of a financial advisor is, and why they should be paying for the advice. It’s not an unreasonable question given the experiences of some, especially those who had a product sold to them or where fees are still being collected from an investment product despite a failed relationship with a broker. In my last blog, “Costs Fees and Commissions” https://moneyweb.co.za/financial-advisor-views/costs-fees-and-commissions-how-do-these-impact-your-investment/ I spoke about the different fees that can be levied against your investments – and how to determine whether or not these are reasonable and fair, so I won’t repeat these here. I thought it may be a good idea to set out why an advisor is important. Below is what I tell potential clients when they ask:  Financial Planning: A financial advisor can help individuals create a comprehensive financial, retirement and estate plan tailored to their specific goals. This is an extremely important document but needs to be kept current and dynamic because not only do your circumstances change, but so do regulations, tax, markets, trends, goals, family structure and best practices and unless this plan grows and evolves with you, it will have increasingly less relevance and accuracy over time. Many financial advisors will do this for you once they have some sort of ongoing commitment from you (and amortise their cost of doing this over time from fees). Sure, there are advisors that will do this for you as a once-off (costing R30K-R50K) but unless it is reviewed and monitored at least annually, it will be dated and irrelevant within a couple of years. Financial plans should cover every aspect of your wealth including risks to that wealth from emergency funds, insurance, and medical aid. It should also contain retirement planning, estate planning and legacy planning. Investment Management: One of the important outcomes of a financial plan is what investments are required. Inevitably there are going to be different investments geared towards different goals. It isn’t as straightforward as you might think. Take retirement planning for example. When, where and how you are going to retire should have a major impact on how and where those funds are going to be invested. For example, should some of these funds be invested (properly) offshore? Are those offshore funds going to be needed in retirement? Should you have a joint account with your spouse? Are you maximising your allowances with your spouse? Then there is asset allocation (cash/bonds/property/cash etc) and portfolio diversification. These ratios will change depending on the location (onshore/offshore), risk-appetite, pre or post-retirement, required income at retirement, interest rate and yield trends and other variables. In short, there is never a ‘one size fits all’ when it comes to investments. To be fair, if you’re young and still building up your portfolio and the broker knows he is not going to get much in the way of fees from you, you may not get the quality of service you (and everyone) deserve. If that is the case, you might as well upskill yourself and just keep on investing – without trying to get clever – using low-cost trackers, and funds. If you want to get a tax break, you can still open a low-cost retirement annuity (hint – don’t use insurance platforms)… ask and I will show you how!  |
| Risk Management Over the years, as a Certified Financial Planner, I have found that my value in being an advisor has come much more from helping my clients mitigate risks than having blow-out returns from investments (which I am not in control of anyway – it is the market that does that). The various financial risks I am talking about are market volatility, inflation, unexpected life events (e.g., disability, death), estate issues (excessive executors fees, offshore SITUS tax, unnecessary or premature estate duty or intestate (no will) issues) or wealth , forced inheritance and other taxes on offshore investments. Also consider the advice around Trusts – local and offshore, Local and Offshore tax structures like Endowments, quasi-trusts, Capital Gains tax mitigation and how this space has changed over the last couple of years. This requires ongoing input to ensure a flexible and appropriate solution. Tax Planning Advisors can offer strategies to minimize taxes, such as utilizing tax-advantaged retirement accounts, sinking funds or endowments (locally and offshore), tax-loss harvesting, how to handle tax in a Trust, use of retirement funds to remove assets from estate duty over time, optimising the spousal wealth distribution, plan CGT events over time to minimize CGT, and charitable giving.  Organisation I’m sure you’ve heard the saying “ I need to get my affairs in order before I die”, in truth, few of us get enough warning. One of the things I have found useful for my clients is what I call their “Red File”. This is a simple editable Word document that anyone can use to get all their affairs in order so that if you’re incapacitated, the executor or a family member just has to pick up the one file and everything important is right there. It can take months off the winding up of an estate. (This is free to anyone who asks, you can drop me an email and I will send it to you). Behavioral Coaching Behavioral Finance is a fascinating and thriving aspect of financial management, and most planners today form a strong, trusted bond over a long period of time with their clients and can provide emotional support and behavioral coaching during times of market turbulence or major life transitions. They help clients stay disciplined and focused on their long-term financial objectives, preventing them from making impulsive decisions that could derail their plans  Access to Expertise Advisors often have access to a wide range of financial products, investment opportunities, and industry research that may not be readily available to individual investors. They can leverage their expertise and network to provide clients with valuable insights and opportunities. For example, I work extremely closely with an Asset Manager so I have access to an understanding of local and offshore shares that my clients are being invested in (directly or indirectly through a fund). I also have access to tax specialists, business gurus, lawyers, executors, Trust attorneys etc who I can call on for advice. Accountability Working with a financial advisor can provide accountability for individuals to stay on track with their financial goals. The financial advisor can also act as your devil’s advocate – and save you from yourself. For those who trade in financial instruments this can be an emotional roller coaster. I tend to get the most queries during a market downturn when individually bought assets dive in price. What must I do now? Is a classic question! Delegating that stress to someone else and becoming a spectator usually gives a better result. Regular meetings and check-ins can help ensure progress and adjustments are made as needed.  Peace of Mind A financial advisor can provide peace of mind by relieving the burden of managing complex financial matters. If you have a comprehensive plan, you can have a look at this whenever you want to make sure you’re still on track. One of the reasons I blog so extensively is to help my clients upskill and stay in the loop (I also do a weekly newsletter and podcast – free to anyone who asks). Knowing that a professional is overseeing their finances can reduce stress and anxiety for individuals, allowing them to focus on other priorities in their lives. As I tell my clients, creating wealth is a simple equation: Income minus consumption equals wealth. I can look after the wealth side of the equation…. they are the only ones that can balance their income and consumption. Overall, the value of a financial advisor lies in their ability to provide personalized guidance, expertise, and support to help individuals achieve their financial goals and navigate the complexities of the financial landscape. Articles and Blogs: Costs Fees and Commissions NEW The NHI and what do do about it New-Normal for Retirement? Locking-In Interest rates – The inflation story Situs – The Myths and Reality Tax Residency – New Rules new headaches Are retirement annuities dead A new look at retirement Offshore investing – an unpopular opinion 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 |