Financial planning is a must for anyone who is earning and spending money. A proper financial plan guides us in the use of our finances and assists us in achieving our financial goals. Financial planning is a profession with a recognised international qualification – the CFP – certified financial planner. Financial planners assist clients in identifying the best ways to manage their finances and protect and grow their assets and wealth, and achieve their goals.
This week the FPI celebrated National Financial Planning Week. Gerhardt Meyer, chairperson of the FPI, says that the idea for a Financial Planning Week has been around for some time, and one that the FPI has seen work well in other countries. If financial planning is a profession, and in SA it is at least a developing profession, then one of the key elements it must fulfil is giving back to consumers. In its first year, the FPI hosted a consumer clinic where professional financial planners gave their time to assist consumers with their financial affairs.
Meyer says that there are many in South Africa who have not been exposed to financial services let alone financial planning. “We have to make financial planning available in an effective manner,” he commented. For most of us paying a financial planner an hourly rate- as you would a lawyer or accountant – is not a common concept and something that the public will take time to appreciate. In addition the so-called Red Book publication – A Safer Financial Sector to Serve South Africa Better -available on the Treasury website www.treasury.gov.org – calls for financial services to be accessible to all. In National Financial Planning Week, and through other education initiatives, the FPI is building awareness of financial planning and showing what a financial planner can do for their clients.
What sets financial planning apart? South Africa is more exposed to financial products – think bank accounts, credit cards and unit trusts, and advice – recommendations to buy these products. Legislation supports financial advice where suitable products are anaylsed, needs are analysed and products are recommended on the basis of this. The value proposition of a planner, says Meyer, is different to advice and product. Financial planning involves identifying goals and then acting as a guide to assist the client in achieving those goals.
Life planning – how you financially achieve your life dreams and ambitions is a further extension of the financial planning proposition. Often we remove our finances from our life dreams and this makes no sense, says Meyer.
Appreciating the value of financial planning does require a mindshift – we still sit in world where the bent broker is the first impression too many see. We can’t force consumers to change their beliefs overnight, but planners can demonstrate the good they do and value they add.
As in all things financial planners cannot operate or offer value without the partnership and buy-in of their client. Clients need to be open to advice, says Meyer, and appreciate that financial planning is not about the sale.
Financial planners registered with the FPI have to comply with international standards, FAIS and a code of ethics, and the FPI has a peer review system where each members actions are scrutinized. Codes are only as good as their enforcement, Meyer says, and the FPI does enforce and act on members not complying with their standards.
Meyer would like to see financial planning in South Africa more clearly positioned and communicated and feels that planners themselves are in the best position to do this as they are the ones interacting with the clients. Along with Treating Customers Fairly legislation and the developments on remuneration, financial planning is moving in the right direction and is becoming more understandable to clients.
He is also supportive of the SASI – South African Savings Institute – Teach a Child to Save initiative.
How does SA compare internationally?
In some respects South Africa is a leader and in some a happy follower. Meyer says over the years South Africans have been at the leading edge of education initiatives, new learning programmes and development of codes of ethics for example. At other times SA has followed best international practice – and this often a good thing as you have the benefit of learning from other’s experiences.
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