Know Your Money with Bronwyn Waner and Craig Finch
Know Your Money with Bronwyn Waner and Craig Finch
130. Every Rand Needs a Plan: Financial Wisdom from Growth FP
Navigating the world of financial planning requires more than just finding someone to manage your money—it demands asking the right questions and understanding the fundamentals that protect your financial future.
In this enlightening episode of Know Your Money, hosts Bronwyn Waner and Craig Finch from Growth Financial Planning break down four essential concepts that form the cornerstone of sound financial planning: provider verification, investment wrappers, time horizons, and asset allocation.
We begin by exploring the critical importance of vetting financial service providers. Did you know that a missing FSP number could be your first warning sign of a potential scam? Learn how to protect yourself from Ponzi schemes and verify your financial planner's credentials through official channels. As Craig emphasizes, "Trusting our clients' money and keeping it safe is the most important thing for us."
The conversation then shifts to investment wrappers—those financial vehicles that hold your investments. Discover why an endowment might be perfect for one person but completely wrong for another, and how some advisors might recommend certain products based on commission rather than client needs. We unpack the restrictions of retirement annuities, the flexibility of unit trusts, and why understanding these structures is crucial for tax efficiency and estate planning.
Perhaps most importantly, we reveal why "every rand needs a plan" and how properly matching time horizons to investment strategies can prevent costly mistakes. That R100,000 bonus you received? Before investing it aggressively, consider whether you might need access to those funds sooner than expected—a misstep here could cost you significantly.
Finally, we explain how these concepts come together through strategic asset allocation, matching investment risk to specific financial goals and timelines. Whether you're saving for retirement, education, or a new car, understanding these four pillars will help you ask better questions and make more informed decisions about your financial future. This isn't just about growing wealth—it's about creating a plan that truly works for your unique needs.
Have questions about your own financial planning? Connect with us at www.growthfp.co.za and take the next step toward financial confidence.
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Hello everybody, welcome to Know your Money. I'm Bronwyn Wehner.
Speaker 2:And I'm Craig Finch, and we are from Growth Financial Planning. We hope you enjoy our podcast. Hello team, good to see you all. Today we're talking about four concepts that we use in our practice to help us with planning for our clients either investments or risk. So, brian, do you want to just introduce it?
Speaker 1:Yes, sure, and what we mean by this is like, as the client, you need to question these four different areas all the time and try and do your due diligence. So the first area is the provider. So who is the provider that us, as the planner, is using? So, is it Alan Gray, or is it some company that doesn't actually have an FSP number? Or, in terms of medical aid, is it a medical aid company that's been in the news?
Speaker 3:you know what's an fsp number okay, so it's a registered with the phone financial services board.
Speaker 2:What's? What's the?
Speaker 1:fsp stands for financial services provider why is that important? Good question. So why that's important is because they are regulated to meet certain requirements and they have to act in certain ways, so they can't just. What was that thing the other day? It was called BHI.
Speaker 2:Yeah, so there are pyramid scams that come up and Ponzi schemes that come up that look so good. That come up and Ponzi schemes that come up, it looks so good. And if something like that comes up and they haven't got an FSP number, they're not regulated by the regulators, then you must do not deal with it, right?
Speaker 3:So if they don't have that, it's a red flag. Yeah, so if your?
Speaker 1:planner is coming to you with something like that. It is a bit of a red flag.
Speaker 2:It's a red flag.
Speaker 1:Do your due diligence and just check that, and then also, on top of that, your planner. What qualifications do they have? Have you actually seen it? Have they just started? They don't even have their RE exams.
Speaker 3:Is there a way to validate or verify your planner?
Speaker 1:Yes.
Speaker 2:We all registered with the Financial Services FSEA. We all registered there, okay, and you can go in on the thing on the website, right, okay?
Speaker 1:So you go to the FSEA and then you type in the person's number or name and you'll actually see.
Speaker 3:You guys are out to make sure.
Speaker 1:Yes, you should, you absolutely should. It's like if you're buying a new phone, you go and check what the camera is, how much memory is on there, what the space is like. Do?
Speaker 2:the same for the provider you use. So you trust your planner. That's number one. Secondly, then they bring. We will never bring a provider that we haven't vetted and it's not well known. No new provider will be ever. Trusting our clients' money and keeping it safe is the most important thing for us. So we'll never bring a new platform with 100% promises of this and that and the next thing, and we'll never do that. So that's important. So the provider would be an Alan Gray, a 91, a Discovery, a Liberty, one of those kind of scenarios. That's what we always present to our clients.
Speaker 3:Okay, so once you've got that provider locked in, what's the next step?
Speaker 1:So then the next step in terms of planning from our side and then also for you as a client to bring up with your planner is often, and I remember, you know, at Discovery or maybe I shouldn't say at Discovery, but when I was working just for a TARD agent often we had to meet our minimums. You know, and if you did a unit trust investment, you didn't really get as many points or whatever the wording was, get as many points or whatever the wording was. But if you sold a client an endowment, you'd get like more commission and more points to your goal. So often an endowment is sold to clients for the advisor to gain, and an endowment isn't for everybody. An endowment is a five-year term investment and it's taxed around 30%. So if your tax rate is lower than 30%, you would have been better off in a unit trust.
Speaker 3:That makes no sense, then yeah.
Speaker 1:It does and it doesn't. So why you would use an endowment if your tax rate was below 30 is you can nominate a beneficiary on an endowment and it doesn't form part of your estate on an endowment and it doesn't form part of your estate. So sometimes, when there's planning and you need to leave money to a specific person or the person's getting sick, you might wanna move it into an endowment, but it's not always the first thing. So the second point is a wrapper understanding what a tax-free savings account is. What is a retirement annuity? You can only access your money from the age of 55. Some clients don't know that. Yes, the two-part system has changed now and a third of that you can cash out. But understanding the wrapper that you are being put into, I think, is important.
Speaker 2:But that's where we guide our clients, because the wrappers if you do that smartly, you're going to save a lot of tax and you're going to save a lot of, and you can save a lot of, and you can pass your assets over to the next generation in a smart way. Yes, the rapper is very important to not just saying I've got this money, I'm gonna leave it in the bank, mm-hmm, that that might be a good rapper for a certain reason, but it's probably going to be a bad rapper for a long term. I'm just giving you an example of a lot of people feel comforted by cash and it is part of planning and it is a wrapper we will suggest, but in certain cases. So yeah, not to go into too much detail, the wrapper is another very important aspect to it.
Speaker 1:And just to that point, the cash in the bank if your estate gets wound up, is locked until your estate is wound up. And, like we've said on many of the episodes, that's about two years, so you've got to make use of and unit trusts work the same.
Speaker 3:I've always had this thing in my head of I want to be able to access my money immediately, so I think that's maybe why some people feel comfort with cash. If I need it, it's there. But again, that's about seven relationships with money.
Speaker 1:We've got to get clients comfortable with all of that, because there is a portion that you must be able to access straight away. That's the keeping one 100%. But there has to be the savings and the growing one, so there's got to be a balance in all of that.
Speaker 3:No, I was just saying. I think that's why some people do Absolutely. Yeah, yeah, no, they feel confident, okay well if I put my money here and I have to give notice and I can't get out, or I can only get it when I'm 55. They're like it's kind of scary for me.
Speaker 2:It's kind of scary For a lot of people and that's where the of presenting wrappers that will suit all applications. Yeah, Okay, the wrapper the next.
Speaker 1:That's number two. So then the third one, which to me is the most important one, is, like I was saying, is that every RAN needs to have a plan. Often people come and say I have 100,000 RAN, can you put it away, for I'm only going to need it in five years time. Okay, we've got to unpack that. Are you really really only going to need that in five years time? Because, if you tell me that I'm going to base that time horizon on how I invest that money for you, so often people get their bonus and they say, okay, just put it all away, I don't need it. And three months time they come and they want to withdraw from there. And because I've now put it into something very aggressive, that hundred thousand Rand might only be worth ninety and now you're drawing on it, it's really, really bad.
Speaker 3:By aggressive you mean the volatility that can occur.
Speaker 1:Yes, so being mindful and understanding what your time horizon is for every rand is really important. So taking that hundred thousand and say, okay, can I have twenty thousand in case of an emergency, fifty for this and then knowing the time horizon is really important.
Speaker 3:No, that makes sense, yeah, 100%.
Speaker 1:And then the last one, which basically ties into that time horizon, is once we now know okay, this is money I'm going to need in a year, this is money I'm going to need in five. That's when we can plan your asset allocation to a T, and by asset allocation I mean how much is in equity, how much is in cash. So your money you're going to need in a year will be in a very cautious kind of money market, or your bank accounts. Then the other stuff at all tapers, depending on that.
Speaker 2:And our practice has models which Fundhouse have built for us over the last 11 years and we've got models that will suit that application.
Speaker 1:Yes.
Speaker 2:And they do the asset allocation, and if we need to take make slight changes on it because of world events or fund managers doing certain things, we can do that in them within the model. But the time horizon is critical to know. Is it for retirement or for education or for short term? We want to buy a car, exactly all those things, and then we allocate the money accordingly to to that, and then the wrapper that it might be hosted in would be another factor of that. So it's very important and the provider that it's with.
Speaker 1:So that's why those four things are.
Speaker 3:So, ultimately as well, it's very important that you're very specific with your financial advisor as to what you want your money to do.
Speaker 2:Yeah, yeah, exactly. Because you're just saying I've got money, I want to save it yeah, just put it away, and then they ask you the next day for it, and then you've locked it up for retirement.
Speaker 3:We can't do that, yeah.
Speaker 1:Yeah.
Speaker 2:Yeah no, but that's what we do, Okay interesting, awesome so that's the four of them.
Speaker 1:It's the provider, the wrapper, the time horizon and the asset allocation.
Speaker 2:Brilliant Great Lauren.
Speaker 1:Some stuff, thanks, guys, thanks guys.
Speaker 2:Thanks, bron Bye. Thank you for listening. If you have enjoyed this podcast and would like to subscribe, please visit our website, wwwgrowthfpcoza. The information we have provided in this podcast is our personal opinion. For more detailed information no-transcript.