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Managing your finances can become increasingly complicated as your income grows, your family circumstances change, and your financial goals become more ambitious.
From choosing the right investments to planning for retirement and understanding the tax implications of financial decisions, there are many areas where professional guidance can be valuable.
A good financial adviser can help you develop a financial strategy that considers your income, assets, liabilities, risk profile and long-term objectives.
In South Africa, financial advisers and financial services providers operate within a regulated environment overseen by the Financial Sector Conduct Authority (FSCA).
But the question remains: do you actually need a financial adviser?
According to SARS, here are some key reasons South Africans consider getting professional financial advice.
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1. To build a personal financial plan
One of the main reasons to work with a financial adviser is to develop a structured financial plan. It is easy to focus on individual financial decisions, like taking out a retirement annuity, buying life insurance or investing in a unit trust, without considering how those decisions fit together.
Having a financial adviser can help you look at the bigger picture, including:
- Income and expenditure
- Debt
- Investments and savings
- Retirement planning
- Insurance and risk protection
- Estate planning
The goal is to create a strategy rather than simply purchase individual financial products.
2. To help plan retirement
Retirement planning is one of the most important reasons South Africans seek professional advice. Your retirement strategy needs to consider how much you are saving, how long you have until retirement, the investment risk you are taking, expected retirement income and how your retirement savings will eventually be converted into income.
SARS explains that South Africa’s retirement system contains specific rules that can complicate retirement decisions. It adds that when retiring from a pension, pension preservation, or retirement annuity fund, a maximum of one-third of the retirement interest can generally be taken as a lump sum, with the balance paid as an annuity, subject to the applicable rules and thresholds.
With an adviser, you can understand these rules and consider how different retirement strategies could affect your future income.
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3. To choose investments that match your goals
There are many investment options available to South Africans, including unit trusts, exchange-traded funds, retirement funds, tax-free investments, shares and other investment products.
The challenge is not simply finding an investment with a potentially attractive return. You also need to consider risk, diversification, investment costs, and your ability to tolerate market fluctuations.
A financial adviser can assist in establishing an investment strategy based on your objectives and risk profile rather than making decisions based solely on recent market performance.
4. To protect your family and income
Financial planning is not only about investments, but not everyone understands it.
Your ability to earn an income may be one of your most valuable financial assets. If you have dependents, a partner, children or significant debt, unexpected events could have a major impact on your family’s finances. A good adviser can help you assess whether you need appropriate protection such as:
- Life cover
- Disability or income protection
- Severe illness cover
- Short-term insurance
- Emergency savings
These are just a few reasons why it is important to get a financial adviser. Getting a financial adviser is not about handing control of your money to someone else. The right adviser should help you understand your options and make better-informed financial decisions.
Also see: Why Gen Z is saving money differently in South Africa
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