Planning so that everyone understands
The FAIS act has put so many additional requirements onto Financial Advisors, (not without reason, I hasten to add), that the interaction can easy become a box ticking exercise. Most advisors have access to a canned product. You input all the numbers and it comes out with a pretty (and verbose) report, which very few people ever read. It’s little wonder that misunderstandings and failed expectations happen every day. Advisors are so poep scared of not having the paperwork ready for a trip to the FSB, that the real job of gaining an understanding of each person/family/company’s specific needs, identifying the areas of misunderstanding and building a relationship of trust go out of the window. This is even more acute as soon as investments are involved.
Dread Disease under the microscope
In risk cover there are some products that are ‘nice to have’ and a ‘want’ rather than a ‘need’ – is dread disease cover one of them?
The answer to this pokes into the murky pool of psychology and behavioural finance, but let’s rush in where financial advisors fear to tread. I was prompted to write this blog after one of my clients, who had ample risk cover, was contacted by the insurance provider call-centre and told that she ‘needed’ more, and with better benefits. I was less than impressed. Call centres mucking around with clients polices without a full needs analysis quite frankly borders on a breach of the FAIS act, but let me steer clear of that pet peeve for a minute.
Dread disease/critical illness cover – heart attack/stroke/cancer etc. – quite rightly strikes fear into most of our hearts. This is even more acute if someone in the family has suffered financially as a result of one of the nasties. The statistics are pretty horrific, with upwards of 20% chance of people being diagnosed with one of them during their working life. In retirement those odds increase every year.
Demystifying premium patterns in life policies
A premium pattern on a life product is illustrated by the graph of the increases in premium over the potential life of the product from inception. Creative use of premium patterns is one of the subtle ways that brokers or call centres will ‘persuade’ someone to switch their life policy to another provider. Even if your advisor has gone to pains to demonstrate the difference in premium patterns, that sort of detail is easily forgotten over time, and the prospect of saving several hundred rand a month can be very compelling.
6 Ways you can save
Nobody likes wasting money – and often we do it unwittingly. Purchases made out of fear instead of logic, getting lost in the smoke and mirrors of complicated small print. Here are some simple ways you can divert unnecessary expenditure items in your financial profile into real return on investment.
When should you calm down your investment?
I get two questions from my clients when it comes to investments at the moment. Either “What can I buy/switch to get the returns everyone is talking about” or “I hope you’re going to tell me when to sell down.”
The general consensus is the stock market is ‘over valued’ but there isn’t a unanimous consensus that it’s about to tank. For over 5 years it has been rising like a feather (with a strong undercurrent) with a few wobbles. We all know – it can sink like a stone in days or weeks. The right time to buy was probably early 2008, but you had to have steel you-know-whats to be that contrarian. When the world and it’s brother, your neighbour, his dog and mother-in-law are all piling into the market – like now – guess what? It might be time to take the profit off the table.
Why is the All share steaming ahead when the economy isn’t. Logically one would think that until earnings get back to the glory days pre-2007, then the stockmarket should lag, but that isn’t the case.
The risk of disability
Like many of my clients out there, I always used to think that disability cover was a ‘nice-to-have’ grudge purchase until I came into the industry and face to face with claims. I couldn’t be more wrong. After life cover for minor dependants, (spice can go out and get a job), it is actually top of the risk list. Somehow it’s okay to spend thousands on comprehensive cover on a car, but if you happen to be in that car that is ‘written off’ there is a good chance you will be in need of as much panel beating as the car! Okay, so maybe it’s politically incorrect to joke about this sort of thing, but it’s about time someone blew away the smoke and obfuscation (yes, I had to spellcheck that one) surrounding temporary and permanent disability.