Keep financial planning simple

HAVE you ever struggled to fully understand financial planning, investments, tax and estate planning, medical aid or shortterm insurance? Or, have you ever wished that somebody could translate all the convoluted and confusing terms into a language that you can understand?

I explain to all Edge clients, the more knowledge we pass onto our clients, the easier our job becomes.

However, the first words of wisdom are: “Keep the end in mind”.

Financial planning and everything related is simply about what each and every person sees as their end goal, dream lifestyle or ideal retirement, because let’s face it, we do not work and go through all the stresses of modern life for nothing!

“Keeping the end in mind” is about the balance between living a comfortable life now as well as planning for future retirement and eventual death. So, what do we suggest? Simple: Use a simple, holistic financial plan.

Before moving on to more advanced needs such as savings plans, money markets, offshore investments and trusts, all new Edge clients have the same process explained to them.

That plan is based on a financial needs analysis (FNA) that takes all needs into account. Like Maslow’s “hierarchy of needs”, we have designed what I call “Ed’s Hierarchy of Financial Needs” (I need to patent it!) that ensures that three basic client needs are identified and tackled first.

No matter who you are, these needs apply to everybody:

1 Medical aid – My dad always said that “your health is your number one asset”. Medical aid is one of the (massively overlooked) building blocks of each and every personal portfolio. Edge has a specialised medical aid team that not just performs a separate medical needs analysis and advises on options, but also provides ongoing management, chronic illness and claims assistance. Sadly, it is only when people are really ill that they realise what a massive negative financial impact not having medical aid really has.

2 Risk – Short- and long-term insurance is crucial. For the sake of financial and estate planning, it is key to ensure that various types of cover are in place. Cover generally falls into categories such as life, severe illness, disability and income protection cover. Numerous theories abound as to how much cover you need to have, but to me it is crucial that clients just have some basic cover in place. The FNA will determine the right level of cover.

3 Retirement – The most discussed of the three basic financial needs. Retirement planning is something that MUST be done as it is the only aspect of financial planning that positively links retirement, tax and estate planning. Unless you are already contributing over 27.5% of your monthly income to a retirement annuity, you are not contributing enough.

Naturally, the key is to ensure that your money is going into the right, risk-based fund. Now, eventually, after this entire introduction, this is where my job as a licensed financial and investment manager really starts. The premiums are tax deductible so therefore don’t really cost you. The question should be, why are you NOT contributing?

In summary, from analysing and advising clients on base medical, life and retirement needs, through to longer-term local and offshore investments, I cannot emphasise how important it is to have people who are experts in each field. I say this as gone are the days when financial advisers also provided advice on insurance and medical aid. What clients deserve are skilled professionals who look after client’s base needs first, before marketing products that a client has no need for.

Hopefully, for the next article I shall be able to include a more in-depth discussion on economic aspects affecting retirement and investment funds.