Committing to a better financial future is easier than you think

As many people’s enthusiasm for their recently adopted New Year’s resolutions wanes, Martin Wagenaar, wealth management consultant at leading financial advisory firm GTC, reminds us of the seriousness of adhering to newly adopted financial goals and ambitions. He also illustrates how this is one New Year’s resolution which can be effected sustainably.

“It is interesting how people resolve to improve their lives at the start of a fresh year, but their proposed changes very rarely extend to their financial future. Just as we convince ourselves that it is never too late to start losing weight, become fitter or learn a new skill, it is also never too late to revise and achieve realistic financial goals,” says Wagenaar.

One of the most common myths about financial planning is that it is reserved for the wealthy. “The truth is that everyone needs to do proper planning of their finances – regardless of the amount that you earn. People are often surprised at what is possible with limited resources, when careful thought and discipline are applied,” says Wagenaar, adding that it helps to remember that very few high net worth individuals got to where they are today without a financial plan and strategy, and careful management of their money thereafter.

He advocates that advice from an independent professional is the best way to ensure that an investor’s hard-earned money works for specified goals and objectives.

“Obtaining an unbiased external opinion from a qualified professional financial advisor, and have them monitor and manage the investment strategy is definitely the best course of action in maintaining a successful financial planning resolution,” he says.

The Financial Sector Regulation Authority (FSCA) is rigorous in ensuring that financial planners and advisors are professional, adequately qualified, and meet continuous professional development requirements, so that they deliver the best possible service to clients, regardless of their net worth.

Says Wagenaar: “Financial advisors have studied the art and science of interpreting an investor’s existing circumstances – such as their income, assets, liabilities, goals and future income requirements – together with their aspirations and objectives, in creating bespoke financial plans. A well-constructed financial plan will be cost and tax efficient, will have appropriate risk/return parameters and pragmatic time horizons.

He suggests one of the reasons people may be reluctant to add financial planning to their New Year’s resolutions – besides the fact that it may not sound as exciting as ‘learning a new language’ or ‘doing 52 Bikram yoga sessions’, is the fear that they will receive bad news from an advisor about their financial reality.

“None of us want to hear that we don’t have enough money saved for (say) retirement, or for doing the things we have always dreamed of doing when we eventually have more time. However, adopting a realistic plan and adapting one’s ‘dreams’ may be easier than we believe,” he says.

“Whilst we may not always like what advisors say – such as spending less on entertainment, cars and clothing and redirecting that money to our ‘dreams’ – we tend to adapt surprisingly fast to proposed changes. Importantly, a good advisor will be empathetic, realistic and reasonable, guiding you to the choices you should make if you want to realise long-term dreams.”

South Africans are spoilt for choice when selecting the ideal financial advisor. Wagenaar shares some tips in finding and selecting an appropriate consultant:

• Professional financial advisors are listed with the Financial Planning Institute (fpi.co.za), with the Financial Sector Regulation Authority (FSCA) (www.fsca.co.za) and on our website at GTC (www.gtc.co.za).
• Financial planners with the ‘CFP’ designation hold an internationally recognised financial planning qualification and adhere to the internationally recognised code of conduct.
• It is advisable to do some research, to find a planner you would be most comfortable with, has experience in the areas you want advice in, and who will consult with you on terms you want.
• Interviews should be arranged ahead of time with short-listed potential advisors. Don’t be afraid of asking specific and detailed questions.
• It may be more comforting and comprehensive to deal with a firm, rather than a stand-alone individual advisor. Financial advice is the sum of many different skill sets and research capabilities. Few, if any, advisors are capable of fulfilling all the disciplines needed on their own. Legal, tax, fiduciary and investment research and advice are needed. A more substantial independent advisory practice may better provide this service.
• Mutual trust and respect are important. Work with a person – or better still – a team with whom you strike an identity. Maintaining your resolution for a successful financial plan is a journey and not a singular destination.

Wagenaar concludes: “Small changes to our lifestyles can go a long way towards improving our financial futures. As we invest in our health, fitness and travel plans, we would do well to invest some time in conducting research into our existing and future long-term financial / ‘dream’ planning.”