Questions you should ask your financial advisor

Generally speaking, when you make a financial decision the outcome is only realised some time in the future.
Your advice should not be taken in isolation and as a once off decision. You need to keep in touch with the advice given by reviewing frequently to ensure it is keeping track with your expectations.
At the outset you need a good relationship with your financial advisor. This relationship, like any other, should be based on transparency and trust.
So it stands to reason that you should get to know your financial advisor as much as possible before taking his advice.
Here are some questions you should have answered.

Who do you work for ?
If your advisor is an independent he does not work for anyone but himself. If your advisor is an agent he works for a company.

Independents answer to themselves. They work for their reasons and are not accountable to any company. They have their own business objectives and expenses for that matter which translates into the
fees they charge for the advice provided.

Agents/broker representatives are accountable to the companies they work for. Therefore, they work towards targets and objectives set by these entities.

Independent advisors need a succession plan to assure their clients will be looked after if the advisor moves on. This places the client in a vulnerable position if there advisor is not there to review the performance of the financial plan into the future.

Agents have the backing of the company they work. The entity will be in a position to provide continuity by assigning a new representative to the plan.

When dealing with either an independent or a representative trust and transparency will always be the order of the day. It boils down to liking your advisor in the light of believing that he has your interests at heart.

What license do you have?
Advisors need to be licensed to provide certain levels of advice.
The licenses are controlled by the FSB and they need to be maintained by the advisor through some stringent compliance which includes continuous development on the part of the advisor to keep up to date with the ever changing industry.
FSB regulatory exams are compulsory for all advisors and they cannot do business without having completed them.

How do you ensure that the advice you give is appropriate?

The advisor should in every instance provide objective advice which suites your situation and lifestyle needs.
He should conduct a comprehensive financial needs analysis before making any recommendations. A need is the difference between what you have and what you want. So how can anyone know what you need without establishing what you have. A financial needs analysis is a discovery process which comprehensively looks at what you have in relation to what you need. Only then can an appropriate recommendation be given. Sound advice?

What’s in it for you?
How do you get paid?
Commissions and fees. What do you actually pay for? Understand this in rand terms and not only percentages which look very different on paper.
1.5% of a R1 000 000 with an annual fee of 0.5% on the value of the fund means that the advisor gets R15 000 upfront which comes off the initial investment and around R5000 plus, depending on the value of your investment, per annum, which also comes off your investment. A 1% per annum fee translates into R10 000 plus per annum which is a bigger slice out of your investment every year and on e would expect more justification over this charge. So its important to discuss what the advisor does for you to justify his fees.

What you should consider when you win the Lotto


A huge windfall of winning a lotto or power ball is a lot more difficult to handle than you might think.
Statistics point to over 70% of people who have won large lotteries having spent everything within seven years and some even filing for bankruptcy. How devastating it must be to be the 
the most envied and the most stupid person in the eyes of your friends and family all in one life time. Just because you didn’t manage your luck the way you should have and could have.

It must be an overwhelming shock to win a large amount of money. The largest win in South Africa is R91 million the second is R69 million. Both from Power ball which has a chance in a zillion of being won.
Yes you win it and your life changes.

So what should you do?
Treat yourself like you would for shock.

Breath deeply and slowly and take your time.

When the win has been confirmed and is in the bank perhaps you should go away to a remote and small place somewhere local and with you spouse have a long hard think about what has happened. 
Take your time to think about what it means to you. Financial Independence – doing things because you want to and not because you have to. Maslow in his hierarchy of needs called it self actualisation. A place most people only dream of and now you have been catapulted into this rare and most marvellous space. The trick is to be able to stay there.

You need to think like wealthy people think.

The wealthy invest first and then spend their gains.
They are always conscious of growing their wealth. So they don’t spend time on how to spend and splurge. They value their wealth realising it is their source which maintains their elevated lifestyle. 
So, your first consideration is you and your families lifestyle and how best you can invest your winnings to maintain yourselves for the rest of your lives.
Wealthy people have financial planners to help them make informed decisions. They don’t take advice from buddies over the bar counter or at the weekend braai.
Your financial panner will address key financial aspects such as:

A contingency fund which will provide for 6 months of your monthly income needs. This fund will be available for any emergencies and should be accessible on short notice.

Paying off all your debts which in turn reduces the monthly amount you need to maintain your lifestyle. You will effectively be earning interest from here onwards rather than paying it to a bank.

Investing in inflation beating assets over the short, medium and long term which will provide your monthly income for as long as possible and lump sum amounts for the future, such as education for the kids, holidays, cars etc..

Managing expectations. A good financial panner will help you to realistically evaluate the money you have and how it reasonable translates into your financial freedom. It might not be worth as much as you think when you take into account the number of years needed to provide an inflation beating income.If you won the lotto at age 30 you will probably need to provide for the next 60 years. I you needed an income of say R20 000 for 60 years protected against inflation then you will need about R15 000 000 depending on certain assumptions.

Your financial planner will also address the issues of tax and risk in your investments and structures such a trust should your plan necessitate it.

Don’t give your family and friends a hand out. Rather a hand up.

Once you are absolutely sure of that your provisions have been invested wisely for the future you can then take some of what’s left over and help your friends and family. Settle their debts on condition that they re-invest the new found disposable income into investments for themselves which in turn improve their wealth into the future.

Financial freedom needs responsibility

Your luck needs to be managed responsibly because it will probably never happen again. It is a once in a life time opportunity to improve your lifestyle and maintain it for many years into the future. Financial freedom is only enjoyed by few, so if you don’t hold onto the win with white knuckles it will slip through your fingers quicker than you think leaving you like most previous winners wishing that they had handled things differently.

Fact of life is that it costs to die…..

Cost of DyingIt’s a crazy world…..of all the living species on the planet we humans are the only ones who pay to live and pay to die.
The topic of death and its financial consequences are probably not considered that often in the family.
Yet it is inevitable for all of us and we need to take a close look at it from time to time.

A way to understand the cost of dying is to follow the calculation used to wind up an estate.
The costs which the executor will apply are:

Liabilities – all the things you owe
Masters fees- R 600
Executors fees – 3.5% plus VAT on all your assets executed in the estate
( this excludes policies with a nominated beneficiary)
Funeral costs 
Capital gains tax above R300 000
Estate duty – above the residue over R3 500 000


The amount of life assurance you need should cover the total costs of dying as well as a sufficient amount which will maintain the lifestyle of your dependents.
This amount depends on the monthly amount needed and how long the they need to be provided for.
A financial planner will be able to calculate a more accurate amount.

Your life assurance policy then should be set against this amount including all the costs of dying as well.