I guess when you’re about to have a baby, adulting becomes a very real deal. Suddenly I have to make important, responsible choices about my finances and future because now it’s not just me, there’s a human who depends on the decisions I make. I’ve never been very tuned into my finances aside from putting some money aside in a savings account, but now I need to think about things like my kid’s future education, risks to my income, and eventual retirement so that I’m not a burden on her one day.
The problem is, I have no idea how to do any of these things. And that’s why I’ve sought out a financial adviser.
So first things first, why would you want a financial adviser
When I sat down for coffee with my future FA from Liberty Finance, this was the first question I asked. “Well,” she responded, “think of it like a doctor or a lawyer. It’s someone who you need in your life to take care of aspects you don’t necessarily understand. Because finances don’t come with a set of instructions.”
I don’t know much about financial investments or risk cover, but luckily I don’t have to. I can seek out someone who will manage this side of things for me, to ensure I’m set up for whatever life throws my way.
Okay, so then how do you find a financial adviser?
This is a bit trickier. Many people will ask friends and family for recommendations. Liberty Finance has a website, or you can pop into one of their walk-in centers to see what they offer.
Once you’ve settled on a person you’d like to meet, you’ll arrange a sit down where they’ll take you through your personal assessment. It’s essential that you ask your FA the right questions to make sure they are trustworthy, reliable and that they’re a good fit for you. It’s a bit like a first date, where you decide whether you want to commit to this person long term.
I’ll pop a list of questions at the bottom of the article that you should ask the financial adviser.
What does the first meeting cost?
At this stage, nothing.
This might change in future but currently the first meeting is free of charge, which is pretty fantastic. For our first meeting, my FA put together a proper quote based on my income, assets and lifestyle. She was able to give me a complete idea of what I’d need to pay to cover future risk scenarios, to set my child up for their education, and to start saving for my retirement. And this was all free of charge.
Where do you start?
My financial adviser recommended that we start with two pillars: Risk and Retirement. Risk covers you for things like loss of income for whatever reason. There are also elements that will support my husband, and that can provide for my child’s education if something happened to me. That’s incredibly comforting to know.
I was expecting the risk coverage to be around R3000 but I can get more than sufficient coverage for around R1000 per month. That’s definitely doable and for meit makes a lot more sense than sitting with a sudden, crippling lump sum expense.
Retirement is the other pillar, and according to my FA you really have to start saving for this around the age of 25. I know it seems way too early to be planning for 65 but realistically if I’m not set up for my retirement, someone else is going to have to take care of me. And I really don’t want that burden to fall on my kid.
You can decide how much you’re able to put away, and obviously the earlier you start, the less you’ll pay on a monthly basis. Say I want to have a monthly income of around R20 000 per month when I’m 65, I would need to start putting away about R5000 per month now. That’s might be a bit steep though – I mean, I got slight heart palpitations – but then I’ll put away whatever I can. The point is to start somewhere.
I was really nervous about meeting with my FA. I felt uninformed and I was pretty sure there would be an eye roll there somewhere. I can honestly say that the whole experience has left me more assured. It was great to meet face to face, and to ask about things I wasn’t sure of. And now I have a much better idea of how I can start planning for my financial future.
Have you met with an financial adviser, or would you want to? What was your experience?
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Smart questions to ask your financial adviser
When it comes to interviewing or deciding on a financial planner, there are some questions that outweigh the rest. These include the following:
1. What are their certifications or credentials?
This question is to ascertain if he or she is a registered Certified Financial Planner or even better whether they are a fiduciary, which means they have your best interests at heart when it comes to making investment and risk recommendations.
2. How do you charge for your services?
This question is broader and better then saying how do I pay you? It’s important to understand all areas of your financial planner’s compensation, if you don’t ask there maybe potential hidden fees.
3. May I see a copy of a sample financial plan?
All financial plans differ according to individuals. What you are trying to see here is how brief or in-depth the analysis is that your FA will conduct.
4. What type of clients do you specialise in and what makes your client experience unique?
With this question you are asking “why do I want to work with you?” Here the planner should give you a mandate or his customer value proposition.
5. What are your measurements for success?
This is a key question because a strong planner will measure success based on how well your plan is progressing against the goals you have laid out and he/she has set up. He will also measure against your age, risk, inflation, benchmarks selected based on your time horizon.
6. How much contact do you have with clients and will I be working with just you or a team?
Again based on their response you can gauge the level of attention, contact you can have with the adviser, and how often you will review your plan together. Remember at the very beginning you need to establish a relationship together hence you may meet more frequently until trust is establish.
7. What happens in the event I become incapacitated?
Even if you can manage your own finances, there will come a time when you aren’t around, either through passing or becoming unable to. A good financial planner will help you with proper estate planning and ways to protect your assets.
8. Lastly in terms of your succession plan, if something had to happen to you what plans do you have in place to assure my needs are met?
Here we are talking about business continuity; to ensure that your financial goals/plans continue uninterrupted should anything happen to your financial adviser.
*This post was sponsored by Liberty Finance