Start Building your Future Knowledge.

In this edition of a Broker in your Pocket, Lee Vakis from our Waterfall Branch, takes us through the pillars of a great Prosperity Plan, and discusses why it is important to form a good working relationship with your broker to create a successful plan…

“Now more than ever in a world of uncertainties and ever-changing expectations, the need for financial planning, financial advice, and assistance is becoming more prevalent than ever.

For many, this means self-education on the basics of financial planning and the reliance and assistance from brokers to help navigate the endless mine field of what we should be investing in.

It is about understanding the risks we are willing to take to make our money grow and what insurance policies we should have in place to protect our families, our hard-earned money, or the assets we have accumulated over the years, and even tax maximisation.

As daunting as the above may seem, there are simple principles and fundamental pillars of financial planning which could assist you in setting up a sound financial portfolio or plan:

1. Risk management

2. Retirement planning

3. Estate planning

4. Tax planning

5. Investment planning

Each of the above forms part of sound financial planning and for many this could mean engaging in all the above or just a few, this is totally dependent on the current situation you find yourself in or the current need at hand.

To understand which of the following is required, we first need to understand what each pillar entails:

1. Risk management

This is an important component of financial planning that everyone needs to consider. By taking insurance cover out on your life, health, vehicles, property etc. you are addressing the risk associated with each of them. Protecting against these risks brings peace of mind to you and your family in the event of an unforeseen event.

2. Retirement planning

This all starts with the two fundamental questions of when you would like to retire and the value you would need at your day of retirement to sustain your current standard of living. Your current savings will be determined by your future goals, so the greater the need the earlier you would need to start and the greater the investment. The type of investment to meet this need must be considered and the impact of inflation taken in to account. Successful post-retirement living can only be achieved through thorough planning.

3. Estate planning

This involves sorting out the relevant legal documentation to protect your estate, for instance, a will that expresses your desires and wishes regarding your estate and property. A properly managed estate helps eliminate any ambiguity concerning your finances, policies, inheritance as they are clearly addressed.

*4. Tax planning**

There are only two things guaranteed in life and that is death and taxes. It is therefore important for tax compliance to be adhered to and managed as best as possible. Many different investments offer tax benefits to clients either before or after retirement, so understanding these and the impact they have on your estate, investments and financial planning is crucial. Eg. A retirement plan offers tax benefits before retirement while flexible investments offer tax benefits after retirement.

5. Investment planning

Investment decisions are based on clients needs, goals, risk appetite, timelines and ultimately fund availability. Based on these criteria your investment strategy is designed and your portfolio/portfolio’s built. The return on the investment will be determined by the extent of the risk taken and the diversification of the portfolio mix used.

Putting all your eggs in one basket such as shares could be risky while using income funds only may not generate the expected returns required. It is important to remember that investments form an integral part of financial planning by providing liquidity to your estate as well as playing a major role in your financial future.

The role of your advisor is not only to be there to assist in implementing your financial plan but also to assist in any queries, claims or administration issues you might have. A strong relationship with your broker is the foundation of any successful plan and walking the long road together can only lead to success and financial goals been attained.

Financial planning is not a one shoe fits all scenario, but rather unique to each individual and their needs. By engaging with one of our many experienced financial planners, we can assist you in implementing a bespoke, tailor-made plan to help secure your financial future.”