Everyone looks forward to their year-end payslip because it means that bonuses are (hopefully!) on the way. But how do you use the extra money effectively - is it better to spend, save or invest?
According to Colin Long, an Advisory Partner and Director at Consolidated Wealth, everyone’s circumstances are unique so there is no single financial strategy that people should consider when it comes to their bonuses. The questions this raises around effective financial planning are however indicative of a much broader issue.
“When you are unwell, you go to a doctor. When you have a water leak, you call a plumber. Why do people have a different approach with their money? We all know that financial security is incredibly important but only a few people seek the help that’s readily available,” Colin explains.
Most people believe that financial advisers are only for the wealthy. The truth, says Colin, is that even if you are in debt, there are many advantages to working with a financial planner.
“If you are battling to get out of the debt hole, your adviser will take a full view of your financial position and will help you with a plan to achieve your financial goals,” Colin explains. “Ultimately, financial planners are experts who help to ensure that you are financially secure in the long-run,” Colin explains.
Here are Colin’s top tips on finding the right financial adviser:
1. Work with Professionals
When you delegate the management of your finances, it is critical that you are advised by a professional. Ensure that your adviser is a Certified Financial Planning professional (CFP®) as this means you are working with an expert who not only has a post graduate qualification in Financial Planning Law, but they also belong to a professional body namely the Financial Planning Institute of Southern Africa and thus adhere to a set of professional ethics and standards. Ask to see your planner’s credentials. It’s a scary fact that of the ±100 000 financial planners in South Africa, less than 5% are Certified Financial Planners, so double-check that you are working with the best.
2. Understand the company
Once you’ve checked out the individual, have a look at their business. Do they work alone or are they in a practice? A larger firm is a definite advantage as they will have specialists who will be able to advise you across the full spectrum of financial planning including tax, estate planning, risk and investments to name but a few. And if your financial planner is a partner or a shareholder in the business, they will have a vested interest in taking care of your portfolio.
Advisers are remunerated by either commission, fees or a combination of the two. Traditionally most financial advisers received commissions from the company whose product they were selling but recently, more financial advisers are opting for fee based business. This has distinct advantages as the adviser can remain totally objective and their remuneration is linked to your investment success. There are however some advantages to the commission route – you can view the financial planner’s quality and level of financial planning before incurring any costs. Whatever route you choose, make sure you have clarity on the exact method of remuneration before proceeding.
4. Questions are the answer
You should partner with your financial adviser for life, which makes choosing the right person essential. Meet them face-to-face and make sure that you feel comfortable and confident with your choice. Every client has different needs and challenges so your adviser should be asking reams of questions about your current financial status and your long-term goals. They will use this information to tailor a unique plan, one that takes your objectives into account as well as your relationship with money.
So speak to a Certified Financial Planner® and implement a plan of action so that when you receive your year-end bonus you won’t be tested over the silly season; you will be able to implement a strategy that is focused on strengthening your financial position.