By Bianca Schmidt
Planning for retirement is one of the most important financial decisions you’ll make during your lifetime. We consider it to be the cornerstone of financial planning. As a result, you need to partner with a financial coach, and a specialist in this field very early in life to help you tailor your financial plan, set your priorities and achieve your goals.
When people think about financial advisers, they often think that they are only for the rich. They think that they don’t have enough money to invest and that a financial adviser only deals with stock market investments and choosing the best portfolio to invest in. In reality, financial advisers add much more value than that.
Research* suggests that engaging with a trusted and qualified adviser and making the correct financial planning decisions can add 1.82% per annum to a client’s returns over time, compared to someone who hasn’t consulted with an adviser. This is not due to the adviser’s knowledge of investments and choosing the best portfolios each year. People with financial advisers have a sounding board, an expert that helps them take their emotions out of the equation and make decisions based on fact, not on popular thinking or hearsay. People with advisers typically don’t make as many changes to their portfolios, as this often destroys value. They also invest for a longer period of time and in products that suit their unique needs.
An adviser is there to help you understand financial jargon and look at your and your family’s financial goals and how to achieve them. Those goals are not always as far away as retirement but can also be short-term goals like getting rid of debt, saving for the dream family holiday and for your children’s education. Financial advice should not be a once-off transaction but a life-long journey towards achieving financial wellbeing.
These days the facts about finances are readily available and people ask why they need to engage an adviser and pay money for the service if they can get the information for free. The information might be available but it can’t take into account your specific needs. Very often the information is out of date or misleading if read in isolation. The Namibian financial industry is a fast-changing industry with new legislation being implemented almost annually. Getting the latest information and applying it correctly very often saves you money, even after taking into account any advice fees you pay.
A good financial adviser is also there in times when things don’t go as planned. If you get retrenched, they can help structure both a budget for the period when you are not working, as well as your severance payment to maximise the benefit. The adviser can advise on the facts rather than your emotions during this period. Also, at other life events like divorce or death, an adviser can add value by looking at the bigger picture. For example, the will that needs to be changed.
An adviser can help a bereaved spouse understand the forms and processes that need to be completed and advise family members on what to do with an inheritance. You can’t really measure the value of this when you have ensured that your loved ones are financially secure because you have done proper professional risk and estate planning.
By being with you on your financial journey from the beginning your adviser can lead you through the various financial life stages. From making a decision on which portfolio to choose when you start your first job, to how much you should contribute to your fund when you change jobs. They can advise on the best options for your accumulated retirement savings so you don’t lose value or pay unnecessary taxes.
They will assess your risk cover to see if you are over- or under-insured so that you are protected in the event of something happening to you or a family member. Where necessary they can align your cover as your needs change and your family structure changes over time.
Some valuable pointers on how to select a financial coach:
- Experience in the field of holistic financial planning is absolutely critical. It is safe to say your future financial coach should be a specialist in all major areas of financial planning: risk assurance, Investments, retirement and estate planning.
- Expect advice for your unique circumstances. A one-size-fits-all approach is not effective.
- Request a comprehensive needs analysis report, assessing all elements of your financial plan.
- Expect a written report confirming your needs or shortfalls and outlining solutions with implementation time frames.
- Reports or proposals should set out all fees to be charged – transparency is critical for building trust.
- Don’t settle or sign on with a particular financial adviser or planner if you are not 100% comfortable and at ease with them. Rather get a second opinion.
Not many people realise that the advice they receive about investing their savings or planning for retirement has such an enormous impact on reaching their goals. The value of a financial adviser might be priced in money but it goes far beyond the amount you see on your statements. Those who have joined our world will tell you that they are so much better off for having made the decision to do so, and not just financially better off, but also with peace of mind.
* “Alpha, Beta and now … Gamma” David Blanchett and Paul Kaplan – Morningstar
Bianca Schmidt is the Head of Individual Client Consulting at Alexforbes