Every so often someone tells me, quite proudly, that they don’t really need a financial planner. They’ve done well on their own, they say, and they’d rather not pay for advice they might not use. I always understand where this comes from. A few people genuinely can manage on their own. But in over thirty years of doing this work, I’ve seen far more often that the “DIY” route ends up costing people far more than any advice fee ever would.
Three recent conversations illustrate this beautifully.
The first was with a retired accountant who told me, with some satisfaction, that he hadn’t paid tax in seven years. He’d lived off cash and unit trusts, flipping the odd property along the way. It sounded clever – until we looked closer. All that was left was a preservation fund, and now he has no choice but to pay a hefty upfront tax on any lump sum, or over 35% tax on the income he needs to maintain his lifestyle. Avoiding tax for seven years has landed him with a far bigger bill today.
The second was a lady who sold part of her business for more money than she could ever spend. Nervous about markets, and convinced a crash was coming, she has sat in cash for three years. Every year the interest has triggered a large tax bill, while the market she avoided has grown by roughly 50%. She has, in real terms, saved herself poorer.
The third was an English gentleman who fell in love with St Francis Bay, made it his home, and became a South African taxpayer as a result. We discussed moving his investments into a proper tax-efficient wrapper – one that would also solve several estate planning headaches. He chose to go it alone instead. The result: a capital gains tax bill of around R6 million on his roughly R100 million portfolio. Had he restructured, that cost would look trivial next to the tax he’ll save over the rest of his life.
None of these were foolish people. Quite the opposite – each was capable, successful, and confident. That’s often exactly the trap. Confidence in one area of life doesn’t always translate into expertise in tax and estate planning.
Good advice rarely feels dramatic in the moment. But as these three stories show, its absence certainly can be.
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Dirk Groeneveld, Certified Financial Planner
t. 083 261 9287
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