Janine Horn, Financial Planner, Momentum
As the cost-of-living crisis continues to escalate, the average South African household is drowning in debt and financial uncertainty. The very notion of financial security has become a foreign concept to millions, which is only exacerbated by the fact that an overwhelming number of South African households suffer from low levels of financial literacy.
Imagine a country where more than half of the adult population doesn’t understand basic financial concepts like interest rates, inflation and savings. A country where people are more likely to fall for scams and predatory lending practices because they don’t know how to protect themselves. A country where people are less likely to achieve their financial goals because they don’t have the tools and knowledge they need.
This is the reality for South Africa, where only 42% of the adult population is financially literate, according to a 2021 survey by the Organisation for Economic Co-operation and Development (OECD). This is significantly lower than the average financial literacy rate of 57% across OECD countries. Our people need help. What they need is the right advice to spur them forward on their journey to success.
This World Financial Planning Day (4 October), we need to show South Africans that financial planning is not only essential but also completely accessible. The truth is that South Africans have more access to financial advisers when compared to the rest of the world. Yet so many South Africans are scared that this relationship is going to cost them dearly. But it won’t. It usually doesn’t even cost a thing, considering financial advisers are often associated with financial products that only seek to financially benefit the consumer at the end of the day.
Financial advice is more than just fulfilling your financial needs and assisting you to achieve your financial goals. The relationship between a financial adviser and their clients is built on trust and is often a long term relationship that is a win-win for both parties.
An accredited financial adviser understands your personal circumstances and helps you organise your personal finances to suit your financial means and needs. So many households are in desperate need of money smarts, but all they need to do is reach out, and the right adviser can completely change their lives.
The latest Momentum/Unisa Consumer Financial Vulnerability Index for Q2 2023, found that consumers have remained vulnerable throughout the year. The Index drew a grim picture with little prospects for a favourable turnaround in the economic landscape to bolster consumer finances. In fact, it found that the economy will likely persist in its underwhelming performance, with consumer price inflation (CPI) stubbornly hovering at relatively modest rates. High unemployment levels are expected to persist, and the state of consumer finances is likely to remain precarious or even deteriorate further. It seems like we need financial advisers more than ever. But how can an adviser turn the tide of financial insecurity?
A financial adviser, in essence, is a trusted partner on the journey towards financial wellbeing. They possess the knowledge and expertise to empower individuals and households to regain control of their financial destinies. This relationship is not just about numbers and spreadsheets; it’s about understanding the unique circumstances and aspirations of each client. It’s about crafting tailored financial plans that breathe life into dreams and goals, whether it’s overcoming debt, securing retirement, or building wealth for future generations.
Trust forms the bedrock of this adviser-client alliance. When seeking the right adviser, individuals should prioritise qualifications, experience and transparency. Credentials like the Certified Financial Planner (CFP) designation signify a commitment to excellence. An adviser’s track record of helping clients with similar financial challenges is equally crucial. Moreover, a trustworthy adviser is forthright about fees and potential conflicts of interest; ensuring their clients are well informed and confident in the partnership.
In the world of financial advisory, there are two distinct paths: the independent financial adviser and the tied adviser. Independent advisers offer a panoramic view of financial solutions, unconstrained by affiliations with specific institutions. They are free to recommend products and strategies that align with the client’s best interests.
In contrast, tied advisers have allegiances to particular financial institutions, limiting their scope to a predefined set of products, but this only heightens their knowledge of how these products can integrate into their clients’ lives. While tied advisers may possess in-depth knowledge of these products, people should be mindful of potential conflicts of interest. However, good advice will always remain good advice.
To harness the full potential of the adviser-client relationship, proactive engagement is paramount. Open and honest communication is the bridge that connects financial goals to actionable plans. Regular meetings with an adviser facilitate the review and adjustment of financial strategies as life unfolds. Questions should be welcomed and encouraged, as they are the seeds of understanding. Ultimately, the success of the partnership hinges on the commitment to follow the financial plan crafted with care.
There are tens of thousands of credible financial advisers out there, ready and willing to shape South Africa into a financially literate success story. A grim economic outlook for the rest of the year should only strengthen our resolve to make the right decisions at the right time. That can only come when you have the right advice, especially when half our country is coming from a place of financial illiteracy. Let us champion the financial adviser as the hero waiting in the wings to save our country. All we need to do is give them a call.