Real Financial Planning Is Not About Products

Real Financial Planning Is Not About Products

by | Nov 21, 2022 | Financial Planning, St Francis

The Human Side Of Money presented by Client Care Lifestyle Financial Planning

Thanks to the financial services industry, many people have the incorrect perception about what a real financial planner can do for them and how they can be of help. Most associate a financial planner with the sale of a risk product or some type of investment. This is understandable as in most cases they come away with having been sold something.

Today every kind of product can be bought on the internet, over the phone or off some app, however buying a product does always come with advice, and real advice can very often not have a product dangling at the end of it. There is also a difference between product advice and real financial planning or what we like to call Lifestyle financial planning (LFP).

Let’s say you buy a new home and use a bond to finance the purchase. Your bank that gives you the bond will require that you have life cover to settle the bond in the event of you passing before the debt is settled. No advice needed here. However, when taking out life cover there are many variations available to you which affect the cost of the cover both now and into the future. These include options such as the term of the cover, the contribution pattern, the guarantee period to name but a few. One would ideally want product advice on these options to get the product structure that works best for you now and into the future. Unfortunately, most are not explained these options.

Now let’s say that 20 years later most of your children have left home and you and your partner are enjoying that same home, with your last child in their final 2 years of school. Your retirement funding needs topping up as you plan to retire earlier than you originally planned. Your bond is almost settled but you still have the same cover you put in place covering the full original bond amount (normally the case). In this situation real financial planning would be of assistance. A LFP would question if you still need the cover or are there perhaps other options or scenario’s that you could consider?

Some options could be:

  • cancel the cover and add the contributions you were paying towards your retirement fund (the bank would allow this if you had other forms of equity like an investment to cover the small balance)
  • reduce the cover to match a particular other debt and again save the difference
  • should one of you pass, an option could be that you sell the big family home and downscale to something smaller, this could be done right away or once your last child has moved out the home

None of the above include a product.

While some advice (product) is helpful, working a with a LFP who asks the right questions from day one makes a huge difference to the long-term lifestyle outcomes that you can enjoy. A real LFP builds long-term relationships that focus on you and your family and most often the cost to you is the same. Why settle for less?

Dirk Groeneveld, Certified Financial Planner

t. 083 261 9287

e. dirk@clientcare.co.za

Client Care Lifestyle Financial Planning

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