A woman’s will

Happy Women’s Day for tomorrow!

In celebration of Women’s Month I wanted to share an article that focuses specifically on a financial planning aspect that is often overlooked for women. Recently, the Fiduciary Institute of Southern Africa (Fisa) discussed some important financial planning considerations for women that highlighted the need for an up-to-date will.

It is estimated that at least half of the estates reported at the Master’s Office each year are of people who died intestate (without a will). This is largely due to the fact that South Africans often don’t see the need to draft a will, especially when they are relatively young or don’t have a significant asset base.

It is important to note that men and women living together are not automatically treated as ‘married’ under the law in case of intestacy. Couples who live together without getting married often assume that the law treats them as married, this is not necessarily the case.

The bottom line? You need your own will and have to understand the implications of your partner’s estate planning.

Fisa often finds that where a woman does not have a lot of assets, or leads a busy life, proper estate planning is neglected. Where estate planning is done, it is important to not only consider current circumstances, but to plan for the future.

The Intestate Succession Act applies to every South African who dies without a will and stipulates that the estate should be divided according to a specific formula. If the person was involved in a relationship other than marriage, the type of relationship will determine whether the partner will be allowed to inherit.

In terms of the Act partners need to be regarded as a “spouse” in order to inherit in the case of intestacy, but the term is not defined in the Act. As a result, other legislation and court cases have to be consulted for an explanation.

Historically, a marriage entered into in terms of the Marriage Act was the only recognised spousal relationship, but with the introduction of the Constitution, the legal system acknowledged that people in other types of relationships were entitled to protection.

Williams says as a start, legislation was passed in the form of the Customary Law of Succession Act and parties to traditional marriages under black customary law are now regarded as spouses when dealing with an intestate estate.

Court cases have also extended the definition of a spouse in this context to include monogamous Muslim and Hindu marriages and polygamous Muslim marriages.

In terms of a Constitutional court ruling, same-sex partners are also regarded as spouses for purposes of intestate succession.

The law allows parties to have a joint will, but Fisa usually advises against it. There have been isolated instances where the surviving spouse dies and the Master’s Office battles to trace the original will that also applies to the surviving spouse.

It is crucial for partners in a relationship to ensure that they draft wills to protect one another.

If you would like some advice on how to go about setting up your will, I’d be happy to advise you on this.

* This content was sponsored by the Fiduciary Institute of Southern Africa.

Source: moneyweb

The power of positivity and a good plan

Have you ever told yourself, “When I have more money, I’ll be happier”? How about, “I’ll never be able to pay off this debt”? These sort of toxic money thoughts are holding you back from financial success – and happiness! A good financial plan needs to be attainable and measurable, those expressions are neither.

The first step to a financial plan is both the hardest and the easiest – it’s the starting point. The point where you measure how deep you are so that you can calculate what you need to do to get where you want to be. Measuring your budget is usually a huge relief for most people, your finances are no longer a mystical figure floating in the ether, you have defined an attainable and measurable goal.

You need to rescript your brain into thinking positive and actionable thoughts. Here are some tips to help you along your way:

Get good advice
Getting good advice and being reminded that what we want to achieve IS attainable does wonders for an attitude of success. However, you will also need to keep your end-goal in mind.

A good way to do this is to pick out a positive phrase that acts as a sort of rule-of-thumb. For example, “Is this [potential purchase] better than a family vacation / new car / bigger apartment?”

Don’t Rush
One study showed that the farther away a goal seems, and the less sure we are about when it will happen, the more likely we are to give up. Consistency is key.

Use numbers and dates to measure WHEN you want to achieve your goals by. And work out some smaller, short-term goals along the way that will reap quicker results. Paying off debts or saving a certain amount, for example, can leave you with a great feeling of pride and accomplishment. This increases the likelihood of you keeping up your good financial habits.

Dig in your heels
Not next week. Not when you get a raise. Not next year. Get started today – and don’t let up!

Need some good advice? That’s why I’m here. Let’s get in touch!

Cancer claims reveal risk trends

Recent statistics made available by Liberty Life reveal that cancer is the leading cause of claims paid by the assurer in 2015. One in four claims paid by Liberty were for cancer, and the proportion of claims for cancer is increasing, even at younger ages.

Motor vehicle accidents are typically cited as the reason that young people need disability or income protection cover, but cancer was a greater cause accounting for 12.3% of claims (motor vehicles accounted for 11.9%). Even more worrying is the fact that in young parents, cancer was the cause for claim for 22.5%.

These statistics are for claims on policies that provide cover for death, disability or dread disease (illnesses such as cancer, strokes and heart attacks). The fact that many people now survive cancer means that most of the claims were paid as a result of severe illness and not as a result of the life assured dying.

Liberty’s claims-payments for severe illness cover increased by 50% from 2014 to 2015. This was not only due to the fact that more people are taking out this cover, but also because of the growth of awareness and early detection of cancer.

Liberty was not alone in their findings. Sanlam’s claims-statistics for 2015 show that 60% of its dread-disease claims were for cancer. At Momentum, 34% of its dread-disease claims were for cancer. At Discovery they were 38%. And at Old Mutual, 57%

An interesting statistic put out by Old Mutual with its claims figures is that 60% of all claims were for people under 45.

You may ask yourself why, if you already have medical scheme cover and loss-of-income cover, do you also need severe illness cover for cancer?

A medical scheme offers crucial cover that you shouldn’t be without. The problem is that cancer treatments are expensive and schemes have rules about what they do and do not pay for. Sometimes a doctor will recommend the best treatment available but a scheme only pays for a more modest treatment or there is a diagnosis of a rare form of cancer that requires specialised treatment.

These statistics show that cancer is still a widespread affliction, even at younger ages. While cancer claims are obviously higher among older age groups, even 20- and 30- somethings should be prudent when it comes to taking out risk policies.

If you have any questions or want to review your policies then give me a call and let’s meet up.

Source: iol

What happens after a market downgrade?

There has been much murmuring in the financial field as of late regarding queries with respect to investing locally, or shifting all portfolios offshore, specifically in the light of the widespread media coverage and speculation regarding South Africa’s credit rating and the likelihood of a downgrade to “junk status” – which could happen as soon as the third quarter.

While there is some speculation about when it might happen the general consensus seems to be that it is no longer a question of “if”, but “when”. It is thought that South Africa’s sovereign debt rating will be cut below investment grade in either June or December.

Why is this happening and what does it mean?

As I have been following, South Africa is facing a downgrade for two reasons:

  1. Slow growth – along with the rest of the world, SA faces lower levels of growth than forecast (and these forecasts continue to fall). There are a multitude of reasons for the slowdown including depressed commodity prices and reduced global demand for commodities, but also a lack of willingness to invest with all the current uncertainty around government policy.
  2. Fiscal outlook – effectively this relates to the ability of the country to control spending given the tax base so that excess spending does not need to be covered by issuing more debt. With low growth and high unemployment, tax revenue is under pressure and spending on benefits is rising. The government’s target to limit gross debt to 50% of GDP is going to be very difficult to achieve.

Many experts have suggested that the immediate impact of a credit downgrade would be a flight of capital, a spike in bond yields, rapid currency depreciation and a fall in equity markets. However, looking at a historical analysis of emerging markets who suffered a similar downgrade returns a somewhat unexpected trend (based on a group of emerging markets that had all been downgraded from investment to sub-investment grade and their performance in the 12 months before and after the move).

Markets are very good at anticipating what is going to happen, in the period preceding the downgrade they tend to perform poorly, but after the fact they gradually perform better – generally speaking.

The trend is clearly that yields expand leading up to a downgrade, but generally recover afterwards. The average currency on a real effective exchange rate basis tells a similar story, increasing relative to where it was at the time of the downgrade.

Countries that are downgraded to sub-investment grade go into recession, almost without exception. It takes years to earn back their credit rating. This is the real challenge that South Africa faces, the policy response will be critical.

Investors should not be overly influenced by the short-term commotion, but rather set their sights further on their investment horizons. There is a tough road ahead, but it is a difficult year for local and international economies alike.

I realize that this blog contains a large amount of technical terms and concepts – if you’re concerned about your investments or would like to discuss off-shore options – then let’s get in touch!

Source: moneyweb

Investing in your fifties

Many young people neglect to plan for their retirement during their early working lives, arguing that they will take care of it later in life when they are earning a bigger salary. However, on the flip side of the coin, as people get older they assume that they must rebalance their portfolios into more conservative investments.

Luckily, most people are choosing to retire later in life.

If you have left investing in your retirement until later in life, there may be a risk in investing too conservatively (not enough exposure to growth assets like shares and listed property) as your investments need to continue to outperform inflation in retirement. Alternatively, you may be tempted to invest in very risky investment schemes. It is really important to construct portfolios which have clearly set out objectives that will be able to meet the targeted return before and after retirement.

How much income do you need per month? Will you need to buy a new car or fund a holiday? You need to know exactly what your retirement goals and dreams are. This will give you an accurate indication of how your assets have to be invested to cover these expenses. You need to be comfortable and knowledgeable about your retirement. You should know exactly how much money you can safely draw to enjoy your retirement without eroding your capital base.

One of the most important things to try and achieve by the time you retire is to be free of debt. You don’t want to be in the position where you have to settle a mortgage or other debt with retirement capital.

Just because you are retired it doesn’t mean you should stop working. Instead, you should re-focus your sights on a pursuit of happiness. People often still make money during retirement. With a lifetime of experience behind you it wouldn’t make sense to not stay busy. View this as the time you have been waiting for to do something you have always wanted to do, but felt like you never had the time to do. Who know, it may turn out to be a successful business venture.

If you need some help working out a retirement plan or would like to revise your current plan give me a call and we can work something out.

Financial Fortifications for Forty Somethings

It’s often said that the best years are the forties – and for so many reasons! Whilst everyone is different, it’s good to state at the start of this article that this perspective is becoming even more prevalent.

Some forty year-olds are in their first marriage with kids, others are in their second or third… with kids. Some have never been married and have no inclination of doing so. These situations place people in very different landscapes, but they all have one thing in common – over forty years of life behind them.

It poses a unique opportunity to view the ‘hike up the mountain’ from a higher perspective than before, and with the goal of retiring even closer in sight than it was in your twenties and early thirties. It’s healthy to pause and reflect, but it’s crucial to then keep on moving forward!

Forty-year olds need to prioritise staying on top of their finances as this is often a time of higher rising costs – regardless of your life choices.

Here are four quick things to consider!

Managing money and investments in your forties

There are often various significant demands on your time during your forties from building your career and family, which means that many investors in this age demographic don’t set up a proper financial plan or neglect to review the plans they already have in place.

If your employer is not contributing to a pension or provident fund for you, it is critical to save for your own retirement and to utilise the tax deductions allowed by SARS in full to build up tax-efficient, inflation-beating long-term investment savings over your working life.

Risk cover should be a priority

In your forties your biggest risk is that you will lose your ability to continue to generate an income. If you don’t belong to a group life scheme through your employer’s retirement fund, it is really important to ensure that you own a personal risk income protection policy to provide adequate cover for your needs.

If you cannot generate an income it also means that you can’t save and invest. If you are unable to work and earn regular income due to an accident, illness or disability event it could turn out much more expensive than to untimely pass away. It is therefore important to ensure that you have adequate cover, including disability and dread disease cover, and to review it as you earn a bigger salary over time as your lifestyle expenses will also increase.

You should also ensure that appropriate medical (health care) and short-term insurance cover is in place and is sufficient for your specific needs.

Tertiary Education Saving

One of the most popular options for this savings goal is the National Treasury’s “new” tax-free savings account (TFSA). Individuals (including minors) are allowed to invest up to R30 000 a year (up to a lifetime limit of R500 000 per person) in a TFSA that can grow tax-free.

It is also more flexible than approved retirement funds as it is fully accessible before 55 and not limited to the Pension Funds Act’s Regulation 28 asset-allocation rules. However, this TFSA is not a replacement for a good investment-linked retirement fund vehicle.

These TFSAs are excellent long-term savings vehicles and investors have access to the money prior to retirement. The longer the investment time frame, the better. It will take roughly 16 years to reach the lifetime capital contribution limit in these accounts.

Play catch up with your RA

Some forty-year olds may only be beginning to save for their retirement. There are strategies to accelerate your savings plan – but you need to meet with a qualified financial planner.

An appointment with a qualified financial advisor for a wealth planning diagnosis is similar to visiting your medical doctor for a regular health check-up.

If your health state has never been checked to see if you are at risk for cancer or other serious diseases, you would never know if you have a reason to intervene and adapt your behaviour. This is also the case with financial planning. If you haven’t done any retirement planning needs analysis and if you do not have an appropriate strategy in place it is important to see a professional financial advisor to assist you in drafting an integrated lifestage plan and to assist you to implement it according to your priorities and goals.

In performing the financial needs analysis to identify shortfalls concerning specific areas of importance an independent financial advisor worth his/her salt can add considerable value with sound guidance and by offering appropriate alternative solutions.

Are you in your forties? Do you have friends who would benefit from this article? Please feel free to share it with them – or get in touch through my contact page!

Several points for this article were taken from: source

Common financial mistakes in your thirties

Saving in your thirties becomes increasingly difficult as your financial responsibilities increase. However, sound financial decisions during this phase of life can have profound benefits at a later stage.

Here are some common financial mistakes to avoid:

  • The first is failing to draw up a budget. A proper budget is the starting point of all financial discipline and should be physically written down for later reference. Include your partner in this process as it is important to ensure that you are both on the same page.
  • The second mistake is do too much too soon. Before investing you need to have accumulated enough savings. It is vital to have an emergency fund, which must have sufficient reserves to cover at least a couple months worth of expenses. This should protect you from a debt spiral in the case of an emergency.
  • The third mistake is accruing bad debt. A loan to buy a house is considered “good” debt. Bad debt is using credit to finance furniture, electronics, appliances, vehicles and other items that devalue over time.
  • At the age of 30 retirement may seem like it is still a long way off, but it is important to start contributing to your employer’s pension fund or a retirement annuity. You should try to contribute at least 15% of your gross monthly salary, there are significant tax benefits to such a strategy.
  • It can be easy to fall under the illusion that bad things only happen to other people. Make sure you have adequate life insurance, dread disease, disability and medical cover.
  • Another common blunder is to contend that wills are only for the elderly. Draft a will, review it regularly and don’t forget to tell your loved ones where to find it.
  • Life insurance is important if you have dependents. It is imperative to ensure your dependents will be in a position to maintain their current standard of living if you pass away. Determine the exact amount of life insurance you need and review your cover regularly as your financial needs change
  • Finally, at this stage of your life, you still have a long way to go to retirement and are in a position to take on more equity exposure. It is essential to get proper advice with regards to your investment decisions.

Need some assistance? Let’s get in touch!

Source: www.moneyweb.co.za

South Africans lack confidence when it comes to finances

Most South African consumers feel challenged by their finances, with relatively few saying that they are highly successful at sticking to their financial goals or are knowledgeable about financial matters.

This was revealed when the Financial Planning Institute of Southern Africa (FPI) conducted a nationwide survey, in conjunction with the Financial Planning Standards Board (FPSB) and a global research firm (GfK), to determine South African citizen’s financial attitude compared to that of the average global citizen.

Both primary and shared household financial decision-makers were surveyed, 19,000 participants from 19 countries around the world, the results revealed the following key findings with regards to South Africa:

Consumers have moderate to low confidence when it comes to their finances.
Only 27% feel strongly confident when it comes to their “financial know-how”, or feel highly successful about sticking to their financial strategies. While 38% of the respondents were strongly confident that they will achieve their financial goals. These figures are higher than their respective global averages, but still aren’t promising.

Home ownership and support for loved ones are top financial priorities.
Home ownership and providing financial support for loved ones were the top financial priorities of South Africans. Other predominant priorities included being free of major debt, retiring in their desired lifestyle and managing finances to achieve life goals.

Financial planning services help to get on track financially.
South African consumers stated that the most helpful financial advice services they received were for retirement planning, budgeting, cash flow, debt management and investment planning.

Most consumers think financial planning should be regulated.
While 43% of respondents in South Africa are unsure whether financial planning is regulated (vs. 41% globally), 67% believe it’s important for financial planning to be regulated, compared to 79% globally.

Trustworthiness is the biggest issue when working with financial professionals.
87% of South African respondents believe that trustworthiness is the biggest barrier when it comes to working with a financial planner. Surprisingly, 70% said they don’t know whom to trust when it comes to financial planning even though they saw it as an important consideration.

Working with a CFP® professional helps consumers feel more knowledgeable about financial matters.
In South Africa, 37% of consumers who work with a CFP® professional report feeling strongly confident in their financial know-how. 29% of consumers who work with any financial professional feel this confident and only 25% who don’t work with any financial professional feel this confident.

It is easy to lack confidence when you don’t feel that you have the “financial know-how”. It is also easy to be overconfident. What it comes down to is not only financial knowledge, but understanding - that’s what I’m here for. I will take you through the necessary processes to formulate achievable financial goals and make you feel financially confident again!

Retirement doesn’t happen at 65…

Retirement planning is only one component of a holistic financial plan and although retirement has a higher probability than all the other risk areas, this is the area we find people being the worst prepared for. Retirement doesn’t happen at 65… it happens when you make it happen!

Planning for retirement is much like planning a flight in a light aircraft. Before you embark on this journey you have to check if your aircraft is in a good enough condition to make the trip, what the weather conditions will be like so that they can be used to your favour and that you have enough fuel in your tank to reach your destination.

This process can be compared to going to see a financial adviser and doing the maths. However, as you fly en route to your destination, things are bound to change. You have to constantly measure your progress and adjust your plan. Setting up a retirement plan is therefore only the first step along a protracted journey.

When formulating a plan you should seek a long-term engagement with a financial adviser that you trust to assist you on your path. Here are a couple of pointers to head you in the right direction:

  • If you plan on retiring at 65, time and errors in assumptions play havoc with the numbers over such long periods. Therefore, err on the side of caution with your assumptions about life expectancy (longer rather than shorter), retirement age (not later than 65 or your company policy), inflation rate (CPI is too low in my view) and expected returns (use very long term historic numbers and adjust downwards).
  • Be specific in your goals. Spend time pondering what you want your life to be like at retirement and plan to reach these goals. Remember though that this plan will need adjusting as you go along.
  • Be sure you match your tolerance for risk with your investment strategy. Bad outcomes are often not the result of bad long-term performance of the investment but because of the investor’s reaction to short term volatility.
  • Be aware of your costs. There are generally three types of fees on an investment (i.e. fund manager fees, platform administration fees and adviser fees). Make sure you are comfortable that each fee taker is worth their fee by looking at the value proposition of each.
  • After five years or so, start using actual money weighted returns instead of projections. There is no sense in projecting at 12% if your actual return over the past five years was 8%. (Some interpretation of the period in question and subsequent returns is obviously required.)
  • Ask the adviser to show you the impact of different average growth rates as well as different retirement dates to understand the profound impact changes like these have on your plan. Extending your retirement age from 60 to 65, for example, can completely wipe out a big shortfall. Remember that there are many different approaches to reaching your goals if you are coming up short. Increased contributions is only one of them.
  • Think holistically about your planning. You can consider direct shares, unit trusts or property as an alternative investment, if it suits your tolerance for risk/volatility. You would do well to take note of the geographical allocation of your investment too. We find many people’s portfolios are very badly diversified from a geographical perspective.

Most importantly, monitor your progress at least once a year. Not checking whether you are on course or not can have a detrimental effect on your projected plan.

Need to formulate a retirement plan? Let’s get in touch!

Source: www.moneyweb.co.za

Retail Distribution Review – Prepare for advice fees

For the first time in South Africa, financial advice is set to become a billable service. Known as the Retail Distribution Review (RDR), the first phase will be implemented later this year (2016), introducing some significant changes for both consumers and financial advisors alike.

As with all change, some sound preparation and a positive outlook will make for a smoother adjustment. One of the main changes in mindset is to accept that making direct payment for financial advice is fast becoming a reality.

RDR forms part of the Financial Services Board’s (FSB) framework that seeks to ensure fair outcomes to customers and tries to minimise potential conflicts between the interests of customers, product providers and advisors.

It is important for consumers to be aware that charging direct payment will be in place of commission based fees, which many consumers don’t generally think of as payment for advice.

Consumers are likely to face various different methods of charging by advisors. They could be billed at an hourly rate, just as they are billed when they consult a lawyer or a medical professional. Alternatively, they could be charged per consultation session or be billed a fee that is linked as a percentage to the size of the investment, similarly to the way a real estate agent would operate.

Customers pay for an advisor’s time, trust and relationship and quantifying these essential elements is found in every point of contact between myself and you - this is partly why I manage a website and newsletter that are dedicated to staying in touch with you.

We will all need to understand that fees are just a different way of paying for all that myself and my team offers. The FSB believes that the RDR will form a win-win situation for all parties involved.