A recent survey by financial services company Acsis looked into the financial security of middle-income South Africans.
They were specifically interested in how secure people felt around their retirement. The survey focused on households earning R30 000 or more a month, the assumption being that at this income level one can afford to save.
The figures were not surprising; more than half of the people interviewed felt that they had not done enough in terms of retirement provision. We know from behavioural finance that people tend to overestimate their retirement provision, so this figure is probably even higher in reality.
An interesting analysis was done around the top three sources people used when making an investment decision, 52% used a financial adviser, 30% used the internet, 26% spoke to friends, family and work colleagues and 25% made decisions based on information in financial newspaper and magazines.
The survey also showed that people who used a financial planner tended to have saved more and had some form of financial plan in place. People who followed DIY strategies tended not to have their finances organised.
So where does the financial media fall into this and what role should it play? I believe the role of a financial article is to inform. If people have information they are able to make better decisions.
A financial article does not tell people on an individual level what to do with their money, and this is a very important point.
For example the media is full of articles on offshore investing at the moment. It may be a good time theoretically to invest offshore, but if you require income from your investments or already have offshore exposure then it would be a bad idea for you.
Exchange traded funds may offer a slightly cheaper alternative, but they cannot provide asset allocation.
An older type retirement annuity may be more expensive than a new age one, but it may have better benefits for your needs or there may be significant costs in cashing it in.
As much as I write about topics and answer questions, these are very generic information exercises. They provide ideas and information to allow you to ask the right questions, but it can never take your entire financial situation into account. This is where the role of the financial adviser comes in.
Even if you can invest your money yourself, have you ever sat down and written a proper financial plan? Do you know how much money you need to meet your goals? Do you understand what risk you need to take to meet those goals? There are few people who have achieved this without an adviser, not necessarily because they dont know enough about investing, but because they lack the discipline. They need someone to make them sit down and face their financial future.
Despite having worked in the financial industry and writing on finance every week for various publications, I will be meeting with my financial adviser next week to check my financial plan and make sure I am moving in the right direction. I see my adviser as a financial coach. Ultimately I make my own financial decisions, but without the discipline from the coach those investments may never happen and that would be the biggest financial disaster of all.
In conclusion, good financial advice is worth paying for, the problem is that there are too many product pushers where people are paying for advice they are not getting.
So if you are going to pay for advice, make sure it is good advice. Read the papers and compare products on the internet so you are asking the right questions, but probably leave your family and friends out of the information equation — those conversations usually lead to the worst financial decisions.
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