During 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.
This week I consulted with a lady whose husband died tragically 15 months ago only to find out that her husband (who had to take care of ‘that’) left a bankrupt estate and at 57 she has to take care of herself; find a home again; take care of her one daughters’ two children; and, wondering ‘how will I ever be able to retire one day?’
Her one day is less than a decade away. She will surely become a burden on her children and has already become that to her 24 year old responsible and compassionate.
In the course of my duties I consult with nine other financial providers and am aghast at how little some people in the industry know until they acquire qualifications. It is for this reason that the Financial Intermediary and Advisory Services (FAIS) act was promulgated in 2003: to protect the client and ensure that the advisors and intermediaries are:- qualified, regulated and have the necessary experience.
It is unfortunate that FAIS protection is inadequate when it comes to direct insurers. These peddle inappropriate and limited products through call centres and their staff who often only have six weeks of experience (not 12 months as per the act), no qualifications and knowledge on only one product.
Direct sold products often only meet a fraction of the needs in a category or not at all. One such example is a product that covers only 5 cancers for the same price as a non-direct comprehensive one that cover all 45 cancers. This unfulfilling product is easily sold to an unsuspecting and unsophisticated public.
Then there is the poor fellow who recons he has sufficient life cover when it only covers accidental death. If he attracts a cancer that falls in the next 40 others he will not be able to cover of R400 000 per year for treatments and should he die, the estate will, as in our example above, be bankrupt because the death was not accidental.
In proper financial planning there are two elements: wealth creation and wealth protection. The creation part is easy, but also most neglected. We should save and accumulate sufficient cash and assets to sustain us later in life.
The protection of wealth (the assets) is more complex and it is here that people suffer millions in losses. Not only do we need to provide for death and disability but also for loss of income; a dread disease (more than cancers and to include stroke, heart failure, diabetes – the fastest growing illness is the USA) and more. The level of sophistication in insurance has become so great that you can also cater for the educational needs of children, their cancers and impairment; and, insurances that will cater financially for frail care needs when you (or your parents) grow old and the pension becomes insufficient.
All these elements must be provided for in an adequate manner, sufficient for your income and lifestyle. And still it does not end there as we also need protection of homes, contents, cars and liabilities toward others; health and wellness needs.
It is a real quagmire of close on a 100 things to consider and unless you are willing to become expert in each element, you should acquire the services of a financial planner to guide and assist you. The planner will not have to facilitate all the business in all the classes but must have a working knowledge or a back office that can assist you. Sometimes the financial planner does not even have to source or provide any product (even though this will be first price) and will assist with a plan on a fees basis – money well worth spending.
The best financial planners can be sourced through the Financial Planning Institute (www.fpi.co.za) and the highest knowledge will come from the Certified Financial Planner (with abilities not dissimilar to a ‘chartered accountant’ in financial planning).
If you are in need of an independant advisor we will gladly refer you to one. Please enter your details in the form under Contact Us – please enter area and postal code when entering your message.