Sound ad­vice can boost your pen­sion by 23 per­cent

Weekend Argus (Saturday Edition) - - PERSONALFINANCE - LAURA DU PREEZ

A fi­nan­cial plan­ner could en­hance your re­tire­ment in­come by as much as 23 per­cent, an in­vest­ment con­sul­tant told a con­fer­ence in Cape Town re­cently.

Robin John­son, an in­vest­ment con­sul­tant at Morn­ingstar’s in­vest­ment man­age­ment di­vi­sion in Europe, pre­sented the find­ings of Morn­ingstar’s re­search into the ways in which a fi­nan­cial ad­viser can add value to your port­fo­lio. The fi­nan­cial ser­vices in­dus­try calls this value “gamma”.

The in­dus­try uses other let­ters of the Greek al­pha­bet to re­fer to the re­turns you earn from the mar­ket (beta) and the re­turns above the mar­ket that a skilled as­set man­ager can de­liver (al­pha).

John­son says Morn­ingstar has con­cluded that you can en­hance your sav­ings by 1.5 per­cent a year, re­sult­ing af­ter three years in 23 per­cent more in­come at re­tire­ment, by im­ple­ment­ing just five of the fi­nan­cial plan­ning-de­rived prac­tices that the com­pany has de­ter­mined can add gamma. Th­ese five prac­tices are:

◆ En­sur­ing that your earn­ing ca­pac­ity and your in­vest­ments are aligned;

◆ Find­ing the op­ti­mal way to with­draw an in­come from your in­vest­ments;

◆ Re­duc­ing risk by mak­ing sure that your in­vest­ments are matched to your li­a­bil­i­ties (such as your pen­sion);

◆ Al­lo­cat­ing your re­tire­ment sav­ings to the ap­pro­pri­ate an­nu­ity; and

◆ En­sur­ing that as­set al­lo­ca­tion and with­drawals are tax-ef­fi­cient.

Next week is Fi­nan­cial Plan­ning Week – the ideal time for you to seize the ini­tia­tive and put your fi­nan­cial house in or­der, or to help some­one else do so.

More than 100 fi­nan­cial plan­ners who hold the Cer­ti­fied Fi­nan­cial Plan­ner (CFP) ac­cred­i­ta­tion will of­fer free fi­nan­cial plan­ning con­sul­ta­tions to con­sumers next week to make you aware of how fi­nan­cial plan­ning can change your life.

Fi­nan­cial Plan­ning Week is an ini­tia­tive of the Fi­nan­cial Plan­ning In­sti­tute (FPI), the body for pro­fes­sional fi­nan­cial plan­ners who hold the CFP qual­i­fi­ca­tion.

Barry O’Ma­hony is an in­de­pen­dent fi­nan­cial plan­ner with Ver­i­tas Wealth Man­age­ment and the win­ner of this year’s Fi­nan­cial Plan­ner of the Year Award, which is jointly spon­sored by the FPI and Per­sonal Fi­nance.

O’Ma­hony says that fi­nan­cially savvy peo­ple harness the power of com­pound in­ter­est to work for them, not against them, by set­ting up a debit or­der for their sav­ings. He says they also use fi­nan­cial plan­ners to help them to get done what needs to be done.

If you are not sure what fi­nan­cial plan­ning can do for you, now is your op­por­tu­nity to try it out for free. Many fi­nan­cial plan­ners will open their prac­tices for free con­sul­ta­tions and some will give free talks next week. Some plan­ners with the CFP qual­i­fi­ca­tion have vol­un­teered to run free fi­nan­cial lit­er­acy clin­ics on an on­go­ing ba­sis for groups, such as em­ploy­ees, trade unions or churches. The FPI has de­vel­oped a pro­gramme which its mem­bers will present to your group on re­quest.

For more in­for­ma­tion about Fi­nan­cial Plan­ning Week, phone 011 470 6013 or visit www.fi­nan­cialplan­ning­week.co.za. Mem­bers of the fi­nan­cial ser­vices in­dus­try who want to vol­un­teer their ser­vices dur­ing the week should email vol­un­teers@fpi­mail.co.za

To give you an idea of what a fi­nan­cial plan­ner can do for you, we asked the three fi­nal­ists in this year’s Fi­nan­cial Plan­ner of the Year com­pe­ti­tion about their ap­proach to fi­nan­cial plan­ning.

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