Effective financial planning starts with an understanding of the individual

You can also listen to this podcast on iono.fm here.

This interview was originally aired on RSG Geldsake in Afrikaans. The transcript below has been translated into English.

RYK VAN NIEKERK: Here on RSG Geldsake we regularly refer to the importance of people and households having a personal financial plan. Now, each person’s financial circumstances differ. We have different incomes, debt, responsibilities and also financial goals, and therefore not everyone can have the same financial plan.

So a plan is actually one of those vital documents that you need. It gives you a clear picture of where you stand financially, and also provides a benchmark against which you can measure your financial progress – and helps you to make better decisions, especially when your circumstances change.

Leandra Senekal is on the line. She is a financial advisor at Insurance and Wealth Creation Professionals [IWCP], which forms part of the Liberty Group.

Leandra, a very warm welcome to the programme. Why do you think it is important for people to go and see an advisor and then draw up a personal financial plan together with the advisor?

LEANDRA SENEKAL: Thank you very much for the opportunity. I am very passionate about financial planning, and I feel every person’s financial journey is unique.

Every person has different goals, responsibilities and aspirations, and two people with identical incomes will naturally need different financial strategies, depending on what is important to them.

So we always do a financial needs analysis. This basically helps us to recognise personal motives behind clients’ financial decisions. It also helps me as advisor to have a custom-made plan for each client, because not every person is alike.

We must also take the client’s priorities and ambitions into account, and the plan must reflect that. So the financial needs analysis gives me a guideline to draw up a plan to achieve the client’s goals.

I also like to say a good financial plan starts with understanding people’s lives, not just analysing their bank balances.

RYK VAN NIEKERK: And how regularly should one look at this plan? It is surely not something that you just do once and then forget about it.

LEANDRA SENEKAL: No, no, not at all. So I always tell a client that at any big event in your life, [such as] if you decide to buy a house, you must of course invite me for a welcome drink or something.

If you get married, I do not expect a wedding invitation, but I need to know how your needs change.

If you have children, if someone dies in your family – or any big event in your life – that is when we must review your plan again.

And we do this once again with the help of a financial needs analysis.

And I also feel the need [to do a review] during periods of uncertainty. The markets have been very bad the last while and have made people terribly anxious.

Then one just does a review again, and says, ‘Calm down, we are on a path. We will get there; we have long-term goals’ – and we must help the client to stay focused on that.

For me, the most important work as an advisor is to help clients make difficult decisions, as well as to prepare for the bad things that happen in life – which unfortunately are not considered realities.

So Liberty has a plan. We must at least once a year contact a client, get out to a client, and every year I use that opportunity to review that plan. I do a new needs analysis.

Clients may have changed jobs, received a higher salary. Then it is necessary to do a needs analysis. So my answer to that is ‘at least once a year and with every major life event’.

RYK VAN NIEKERK: What is a major life event in your eyes?

LEANDRA SENEKAL: Always marriage – because you now have another person to look after. Buying a house – you always need a policy. You always need to pay off that bond if something were to happen to you.

Another big event is of course if you have children.

When the children leave home, when your children finish studying, then your focus shifts again to ‘I don’t need to look after my children anymore; now I must rather look after myself and my old age’.

So my four major events are marriage, buying a house, children and retirement.

RYK VAN NIEKERK: Now say now someone doesn’t have a plan and is listening to this conversation, where to begin? What is the first thing to do – except maybe to make an appointment with an advisor?

LEANDRA SENEKAL: The most important thing is to always remember it is never too late to begin. Of course, make an appointment. Most Liberty advisors offer a no-obligation, free financial needs analysis, just to see where you stand.

So begin with an appointment with a financial advisor. I might even say don’t [go] with the first and best.

It sounds terrible now, but you must feel a connection with that person. For the rest of your life you must walk alongside that advisor. You must be able to trust them 100%.

I get a client and sit down with them, I like to chat with a man and a woman together, to say: ‘Listen, we are going to walk a lifelong path together. You must be able to get along with me.’

So the first step is always to make a connection with an advisor. If you are not satisfied – I don’t want to compare myself with a doctor, but you are not going to let the first and best doctor work on you. You must be comfortable with that person.

At the end of the day, I am the person they must trust, and they must be able to contact me and say, at any time of the day, ‘Leandra, this has now happened. What do I do now?’

So yes, that is what I will say to them. Get yourself an advisor with whom you are comfortable – that is the most important to me – and whom you can trust 100%.

RYK VAN NIEKER: Yes, that must be interesting to do. What is usually the situation for someone who looks at their first plan, and then looks at it afterwards – to then see how much they now have to save to retire comfortably one day?

Are most of them surprised about what awaits them – especially if they are no longer that young and have time on their side?

LEANDRA SENEKAL: I always ask my clients, ‘What is your budget?’, because it must be realistic. And, as you say, the younger a client is, the easier it is because the numbers look much, much better.

But I also feel I must observe the client’s reaction, not to calm him or her down, but to say: ‘Listen, this is where we are; this is what you will need to achieve that goal. Maybe we won’t be able to get there, but let’s see if we adjust it a bit.’

You are perhaps, one day when you retire, maybe not going to stay in a beach house in the Cape. No, you are perhaps going to stay in Johannesburg, in a suburb. So a person always reviews it.

I think some people are surprised when they see that it is feasible.

And once again, as I say, that is where the advisor must come in. You must set feasible goals for your client; you must give your client feasible options. Something that makes them feel, okay, I can do this.

And that is also what is important to me. If I sit with a client, I want to know what his budget is. Don’t let me step in with him and say, ‘Client, if you retire, you want to R100 000 a month. For that you have to put aside R35 000 a month at the moment’. That is an unrealistic expectation.

So I always start by saying let’s look for a budget – and we work according to that.

RYK VAN NIEKERK: Leandra, thank you very much. That was Leandra Senekal, a financial advisor at IWCP, which forms part of Liberty.

Brought to you by Liberty.

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