Retail Distribution Review (RDR) – is it worth the bother and all the additional cost incurred for implementation and monitoring?

South Africa need independent financial advice now more than ever before.Retail Distribution Review (RDR) – may be detrimental to personal savings_1

In November 2014 the FSB released the Retail Distribution Review (RDR) as an attempt to grant consumers better results from investments, but may very well get contrary results.

The recommended “improvements” appears to entirely exclude the independent financial adviser from the value chain and if you the consumer think you need an adviser the two of you must negotiate the fee that you will pay to them.

At a forum discussion on the RDR I attempted to represent the true plight of the consumer, as experienced in responses to articles published in The Star Workplace over a six year period. I was quietened and now know that none of the points made below were even considered.

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Retail Distribution Review (RDR) – may be detrimental to personal savings

Retail Distribution Review (RDR) – may be detrimental to personal savings_1South Africa need independent financial advice now more than ever before. In November 2014 the FSB released the Retail Distribution Review (RDR) as an attempt to grant consumers better results from investments, but may very well get contrary results.

The recommended “improvements” appears to entirely exclude the independent financial adviser from the value chain and if you the consumer think you need an adviser the two of you must negotiate the fee that you will pay. The fees were traditionally paid by insurers as commission.

Do you want to expose yourself to the insurer directly? Read on and decide.

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Shop around before buying this Festive season

We were brought up believing that Christmas is the time for giving. My wife and I were considering this fact these lastShop around before buying this Festive season_1 few weeks and we came to the conclusion that, yes it is true when we give, yet it is the retailers that receive, as prices escalate astronomically this time of year.

We were considering the prices of a favourite brand of cat food and a brand of butter. Both had escalated in price by more than 30% during this year and recent priced specials were still 10% dearer than a year ago. This makes it increasingly more difficult to use this time of giving for the intended people, the ones we love.

It is like a conspiracy when the prices jump up in the third quarter of each year. We later believe that we are receiving great value when prices return to slightly lower levels, believing that we are getting a real special – a bargain.

A few years ago we visited family in the USA and we had so much stuff to bring back that we realised we needed more bags to carry it all. The family advised us to wait till after Christmas and get things at real bargain prices. We bought branded sport bags for 5 dollars (R65) that cost 15 dollars for Christmas. This is common in the USA when at the end of season great specials are offered, true clearance sales.

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This morning I gave a balloon to a toddler

ID-100284942This morning I gave a balloon to a toddler. What joy and pleasure when she ran back to show her mother what she had gained. The mother smiled and thanked me for the gesture. This happened Sunday morning at the Wimpy at Bergview near Harrismith.

I had to spend the night there after a second breakdown en route back from Pietermaritzburg. The events of the previous day could have caused me to react far differently toward the toddler. Many people see toddlers as a real bother, not I, not this morning.

I again realised that it is when we are under pressure that our true character shows. What will come out of you? Sweet honey or sour lemon juice. I thank God that in this instance this morning it was good nourishing honey that was produced.

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How to make everything right

How to make everything right_1This last week I observed and interviewed several younger people who appear to ‘not be making it’. They are losing jobs because of greedy bosses, but mostly due to underperformance and are not putting in the same effort as a 30 or 40 something person. They no longer accumulate reserves for a rainy day as their parents did and live so close to their limits that the slightest hic-up will cause them to give up their independence and move back in with their parents.

Then I spoke to a man who runs a business compiling databases for several corporate clients with email campaigns, who informed me that the canvassing he does is most successful when done for personal loans. There is no surprise in that, what is surprising is the age group with the highest uptake – ages 20 to 28. The loans will buy the image they want, to give an appearance of being successful.

This got me thinking of the causes and the effects and today I want to show you (younger and older readers) how to make sense of making things right. It came up in Afrikaans: “kom ons maak alles REG” (in a direct English translation: let us make everything right). I am going with the Afrikaans abbreviation that gives the meaning for the day. R, is for Rewards; E, is for Effort; and G, is for Goals.

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Inadequate and insufficient financial provision cost families and individuals millions

Inadequate and insufficient financial provision cost families and individuals millions_1During this last month I was once more astounded at how little real financial provision is made by people and also how inadequate and sometimes inappropriate the advice is that consumers receive. Today we look at the problems and then how to make sense in overcoming them in our own lives.

We do not make sufficient financial provision for ourselves or for our families and do not illustrate that we will ‘cherish, love and protect’ our families. It is far too often that I still hear woman (or life partners) say, in this day and age, that I leave ‘that’ (meaning insurance, medical aid and retirement provision) to my husband/partner.

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Make savings an expense item in your budget

Make savings an expense item in your budget_1Apart from doing personal financial consulting I also do business consulting. During the past few weeks I have been working with a company who wish to get better insight into the financial position of their company. I am not an accountant and their accountants wanted bookkeeping answers while I was contracted to help give them financial management insight. Even though the two appear to be the same thing, they are not. The leading question to distinguish the difference is when asked what is the most important financial instrument. They replied that it was the income statement. The answer is in fact the budget. The income statement reflects and records the facts as they occurred in the past whereas a budget indicates how monetary spending must occur in future. The first thus looks backward and records history while the budget looks forward and guides us toward where we want to be.

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Medical increases

Medical increases_1During the past few weeks all the major medical aid administrators have been announcing their new rates for 2015. We will again see increases above salary inflation at around 10% to as high as 30%. It is becoming increasingly less affordable and we will again see many people downscaling on their medical aid cover in 2015; and, worse some cancelling much other necessary insurance to make sure they can hang onto their medical aids.

I attended a few of the launches and the most enlightening insight was gathered at the Momentum event. Their research revealed that so great is the fear of medical disaster that as many as 40% of all members were over insured, meaning that they were paying for covers they never use. The greatest portion of the high costs are generated by the out of hospital expenses and soon the most, perhaps only, affordable option will be to insure the in hospital insurance covers and taking full responsibility for the out of hospital expenses.

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How irresponsible people are when it comes to finances

How irresponsible people are when it comes to finances_1During the past two weeks I had several meetings that once more illustrated how irresponsible people are when it comes to finances. The first of these meetings was on bikers. The clubs are growing tired of having to go begging for money to bury fellow members who die in accidents, or if they die for a different reason as was the case with the road rage incident that is serving before the courts at the moment. Bikers, illustrated by the way they drive, will be expected to be irresponsible and they do not even buy the simplest of covers, funeral insurance. But it does not stop there.

Schools are inquiring about accident injury policies for learners while in their care. Why? Because, parents do not have medical aids or medical insurances and hold schools responsible for injuries and proper care when their child is injured at school; while on a school event; or, due to a sport injury. The school, as much as the biker club, must take responsibility for the child and costs can only be averted by taking an injured child to a state hospital facility. But how do you divert ambulance cost if the child must be transported from place of injury to the hospital.

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How to make sense of complex financial products

How to make sense of complex financial products_1Our company consultants have been going through several training sessions with various insurance companies and each time we come away with enough reading material to fill a small suitcase or to choke a donkey. We are professionals and know more than 90% of all other people about insurance risk and investments and we find it difficult to not just understand and disseminate the information, to then compare and find the best solutions. This made me wonder: how do Mr and Ms Average South African make sense of it all?

We were comparing the reduction in yield of various products and I realised that most of our readers will not even understand the term, let alone its possible impact on their lives and investments. Today we will look at how to make sense of reduction in yield; where to find it; what it means; to know why it is important; and, who to turn to for help.

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