by SFT | Sep 25, 2023 | Financial Planning, St Francis
Every year, I make sure to head to the bush a few times. Our favourite is the Kgalagadi, and we haven’t missed a trip in the last 13 years. What I find so special about the place is its harsh natural beauty. The landscapes, sunsets, and sunrises are unmatched, and to remain alive, every animal must be in peak condition. We go there to slow down and reset. It’s also the one place I can read books to keep me updated on aspects around our Profession.
Nick Murray is an author who writes about investing and financial planning. Having finally managed to get his book from the USA (second-hand), I devoured it on our last trip. He has a wonderful way of simplifying complex matters, so I am sharing 5 gems in this week’s article, with some observations.
Here we go!
This makes sense. It’s what our business is built around – planning. It may seem obvious, but experience tells us that most people have advisers who look at their money and pretend to know where the markets are going. A plan around the client’s life is vital.
It is common knowledge that, on average, the average investor’s investments underperform the market. This is due to clients and advisers trying to pick winners and not having a proper long-term investment strategy that they stick to.
Trying to time the market is a nil-sum game, yet many claim to be able to do so?
The market drops at least 4 times every year, so turn off the noise and save yourself some stress.
5. The only risk with stocks is not owning them.
The stock market is the only guaranteed way to outperform inflation over the long term: buy the great companies of the world or save yourself poorer.
The financial services industry loves to make investing complicated, while the reality is, it’s not. If an investment cannot be explained simply, run a mile!
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Dirk Groeneveld, Certified Financial Planner
t. 083 261 9287
e. dirk@clientcare.co.za
web. Client Care Lifestyle Financial Planning
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by SFT | Sep 18, 2023 | Financial Planning, St Francis
Last week we had a review meeting with one of our long-standing clients. I have worked with the head of the family (let’s call him John) for over 20 years from his days as a salaried employee to his current position, a partner in a successful local business. Being able to walk this path alongside him has been a wonderful privilege. What made last week’s meeting special is that our client brought along with him his wife (Mary) and their 18-year-old daughter (Jill) who was down on varsity holidays.
As a rule, when we start working with clients, we encourage both members of the couple to be involved from the start so that we can build a relationship that is meaningful to each of them. Proper financial planning will only work if a couple build their plan together and take joint ownership of it. In the past, it was often the man in the relationship who dealt with “the money” while the wife raised the family. This has led to very sad outcomes for various reasons, so we have learned that including both husband and wife works best.
Around 5 years ago John & Mary started investments for their 2 daughters and made sure that the monthly debit orders came off the daughters’ accounts. Unbeknown to me at the time, this became known in the family as the “Dirk tax”, I was not the most popular figure in the 2 daughters’ lives!
When I was informed that Jill wanted to discuss her investment with me during the planned review, I was not sure what to expect, so when she informed me that they both wanted to double their debit orders, I was pleasantly surprised.
After a few years of working while at varsity, Jill & her sister had learned to budget and even put savings away, this while knowing that if they wanted to, they could spend their full allowance earnings. It may seem like nothing special but trust me, “budget” is the scariest word or discussion point in most households. Ironically, it is also the most important key in all financial planning.
Another thing that happened was that John & Jill discussed their family financial plan and vision with Jill present, including the numbers, which are very healthy. John then, as he leaned back comfortably, expressed that should anything happen to him, Client Care would deal with everything that needed to happen.
Proper financial planning is indeed a family affair, and the real reason is because it is about more than just the numbers.
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Dirk Groeneveld, Certified Financial Planner
t. 083 261 9287
e. dirk@clientcare.co.za
web. Client Care Lifestyle Financial Planning
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by SFT | Sep 4, 2023 | Financial Planning, St Francis
Deciding when to retire is a massive decision we will all face one day. Apart from preparing ourselves for the lifestyle changes that come with stopping work, we must also make some decisions about our retirement investments. One of these decisions is choosing a life annuity of a living annuity for our retirement funds.
Let’s first look at each of these products.
Life annuity: Life annuities are insurance or investment products that provide the beneficiary with fixed payments at regular intervals—either monthly, quarterly, annually, or semi-annually. Life annuities are generally sold by insurance companies. They essentially act as longevity insurance, as the risk of outliving one’s savings is passed on to the annuity issuer or provider. There are many different types of life annuities, but the basic principle with them is that once bought, you are locked into their rates forever, and these rates/incomes are guaranteed.
Living annuity: A living annuity provides a selected income from your retirement proceeds. Your retirement funds are invested, and you have investment choice; it enables you to adapt your income annually, allowing you to balance your income and capital preservation needs. The biggest feature of a living annuity is that you have a certain amount of control over your funds and income; there is normally no guaranteed income.
Over the last few years, there has been much debate around which annuity is better for retirees. Today, we can even purchase a “hybrid annuity” that combines the characteristics of both.
Unfortunately, there is no simple answer to the question of which will better serve you as there are so many things to consider. I believe the single biggest consideration is asking yourself is:
- Do you have a proper long-term financial plan that considers how you want to live your life through retirement and
- Do you work with a financial planner and planning firm that will be around for your retirement?
As we live longer and healthier lives, it makes sense not to lock oneself into a product with little flexibility. Being able to adjust as life happens can greatly benefit us and those who depend on us.
I believe there is a place for both products in certain situations; however, making the decision around your personal plan makes the most sense.
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Dirk Groeneveld, Certified Financial Planner
t. 083 261 9287
e. dirk@clientcare.co.za
web. Client Care Lifestyle Financial Planning
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by SFT | Aug 27, 2023 | Financial Planning, St Francis
We don’t like to talk about markets very often because what they do is beyond our control. Unlike others, we also do not claim to know where they will be in the following days, weeks, months, or years. Years, yes, in years, the markets will go up, but that’s another story.
This year’s market movement deserves a mention because it is one of those times when even the most patient investors can be tested. As the graph below illustrates, if an investor behaved badly and looked at the market daily or weekly, they would have experienced every emotion possible so far this year.
From euphoria after the new year of being nearly 10% up in the first 2 months to helplessness at the 10% drop the following 2 months. Today, after almost 8 months of ups, downs, and sideways movement, the JSE are around 2% up.
Consider all the wasted and needless stress that the undisciplined investor goes through by simply not controlling their behaviour?
You may say, “Well, it’s my money, and I need to know what’s happening”. While that may be true, the reality is that watching and worrying will not give you better returns but WILL give you more stress, which affects you and your health daily.
One way to avoid this fruitless behaviour is to make sure that you have an investment strategy that you understand and that this strategy is directly linked to your lifestyle plan. This should have been done upfront with your adviser and should need minimal fiddling if done correctly.
Unfortunately, we get used to having all this information in the palm of our hand. Whether on an app like 22seven, where we can check our balances across all institutions at any time of the day, or just by logging on to a provider’s app, this behaviour can become a part of our daily routine but does not serve us.
It’s like checking on a marathon runner’s position every 100 meters.
The less you look, the smoother the ride. That same graph over 3 years looks quite different, with a +32 % return.
I have used the JSE in this example, but the same principle applies to the world markets. Focus on what you can control and let the great companies of the world do what they do. GROW.
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Dirk Groeneveld, Certified Financial Planner
t. 083 261 9287
e. dirk@clientcare.co.za
web. Client Care Lifestyle Financial Planning
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by SFT | Aug 24, 2023 | Financial Planning, St Francis
We all want to live a life of meaning and purpose. It sounds great and straightforward, but it can be like trying to get that elusive hole-in-one! Often, it happens when and from a place we least expect.
A few weeks ago, we heard the news of the passing of Sugarman. Jesus Sixto Diaz-Rodriguez was a cult hero when I was in my late teens and early 20s. His uniquely simple style meant I could sing along to his songs with my mates at a party or reflect on life while listening to his album Cold Fact on my Walkman while lying on my bed at night in the army barracks. His music just got me and was part of growing up too many of my generation.
Unbeknown to us was that at that time and for decades thereafter, he was unknown and a nobody in his home country, the USA. In fact, he had no idea of his fame and fanbase across the ocean. This was until a group of SA fans decided to test the rumours of his early suicide for themselves and headed off to Detroit and found him.
The rest is history. Rodriquez relaunched his career, helped by the movie “Searching for Sugarman”, and even gained fame in his home country.
I remember attending one of his last concerts in PE with friends and my then-challenging teenage daughter. She went off and sat with her friends right in front of the stage while we sat further back with our mates. Sixto was past his best, but the evening was still wonderful. While driving home, my daughter expressed her delight that, to the surprise of her friends, she sang along to all his tunes. When asked how she knew the words, she replied that “her dad” played this music all the time on the way to school. You can imagine how cool I felt! For a moment, my teenage daughter and I connected.
The next day, I was flying to Cape Town for work and when I walked into departures, who was sitting there? Yip, Rodriquez. Everyone was staring at him, but I thought, hey, why not. After asking his daughter for permission, I introduced myself to him and shared the previous evening’s experience with him. I thanked him for the years of memories his music had given me and the moment he had given my daughter and me. His simple response was.
Hey man, thanks for giving me a life.
At the time, I didn’t realise how profound his reply was.
The lesson from this experience is that whatever we create out of passion and purpose will have meaning to someone, somewhere. Just because we do not see the results immediately does not mean they are not there.
You may wonder what this has to do with finance? Everything, a life with all the money in the world but no purpose or meaning, is not worth living. Don’t make the mistake of just focusing on the finance, the numbers. Find out what feeds your heart and your soul; the money is simply there to facilitate the life you want to live.
I hope this resonates with you,
I wonder?
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Dirk Groeneveld, Certified Financial Planner
t. 083 261 9287
e. dirk@clientcare.co.za
web. Client Care Lifestyle Financial Planning
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by SFT | Aug 14, 2023 | Financial Planning, St Francis
In many of our articles, I bang on about the importance of having a long-term financial plan. The simple reason for this is that most people don’t have a plan, even if they work with a financial planner. A survey in the USA revealed that although 75% of their citizens engage in financial planning, only 15% actually have a plan.
The assumption I come to from this is that if someone doesn’t have a plan, then they have a transactional relationship with someone which is focused on their money and the products they get sold or buy.
Other studies show that people who think longer term about their life and finances end up having far more wealth than those with a short-term focus on both. This again shows the benefits of thinking and planning long-term. The irony around planning itself is that once the plan is written, it is old and may even be redundant because life happens and can change in a second. Planning is a verb. It is ongoing.
I have also seen this with many of our existing clients. When we first start working with them, 99% have no plan in place at all, but they do have some savings and investments. Once we have assisted them in building a longer-term plan which mirrors the life they want to live, we see this change. In most cases, after 3-5 years, they are well ahead of where we planned for them to be financially. Either they have settled debt quicker than expected, or they have accumulated more investment wealth than we estimated at the beginning of the process.
The more personal the plan is, and the more ownership they have over it, the more successful the financial journey becomes.
Many people avoid the process of planning properly because it seems scary and because they know it will likely reveal that they have let things slip in one way or another. Often, they find finances confusing and difficult to understand, and in many cases discussing finance leads to conflict in the home.
I would encourage anyone who does not have a plan to consider creating one. Once you learn how to work with that plan, it will give you more control and peace of mind. If this task seems too daunting to take on by yourself, give us a shout, it’s what we do.
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Dirk Groeneveld, Certified Financial Planner
t. 083 261 9287
e. dirk@clientcare.co.za
web. Client Care Lifestyle Financial Planning
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