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Put your financial advisor’s number on speed dial

There’s much to be learnt from approaching your personal finances like you would a business’s finances.

I often hear about individuals who cannot remember their financial advisor’s first name. There are many parallels we can draw between the value a financial manager can add to a business, and the value they can add to your personal finances.

There is much to be learnt from approaching your personal finances similarly to how you’d approach a business’s finances.

In South Africa 70% to 80% of businesses do not make it past the five-year mark. On the personal financial front, we are often told that only 6% of South Africans can retire comfortably. What both of these statistics reveal is that achieving financial success is not easy. Instead, it requires hard work and a clear strategy. But while many will accept that this is part and parcel of achieving business success, few are willing to invest similar time in their personal financial success.

Challenges faced by ‘business- and personal finance’ can be very similar.

  • Cash flow is the origin of monetary survival. Cash flow is the cumulative scorecard of your collective business/individual Businesses generate cash flow from the successful management of a product/and their operational resources. Individuals generate cash flow from selling time and knowledge for salaries/self-employed income. Individuals need to manage the consequences if their cash flow suddenly dries up due to retirement, retrenchment, illness, old age or death. Each scenario is complex and needs simulation (e.g. READ: How will I be taxed on unit trust withdrawals?)
  • Credit management: The level of business/personal debt should be carefully managed and is a key indicator of future financial progress (considering the cost of credit). Credit adds risk within each business and personal finance scenario, and is one of the biggest stumbling blocks towards reaching financial independence.
  • Diversification: Successful businesses diversify their income streams to be less dependent on one product, market, currency or geography. Investors should aim to successfully diversify their assets across different asset classes, currencies, geographies and service providers.
  • Succession: Succession planning (who takes over ownership/management) remains key for long-term business survival. Similarly, you will need to take these decisions in your personal capacity when leaving assets behind to benefit your loved ones. These decisions rest on liquidity, legislation, and costs (also tax) considerations.
  • Insurance: Long term (buy and sell agreements/keyman) and short-term insurance are vital for business continuation (cash flow). Not all business risks can be managed by good managers. Risks that cannot be managed have to be insured. Insurance brings these risks down to an acceptable level. Individuals should ensure their lives, assets, income and health to prevent their financial plans derailing.


Business vs personal finance

Businesses place these important decisions in the hands of trusted, trained financial professionals due to the complexities and enormous responsibility these decisions carry. Individuals generally underestimate the complexities of their own financial planning and often unknowingly pay the price for this.

It is important to note that it’s senseless to do any personal financial planning, if business owners have not undertaken advanced business financial planning. Many business owners’ massive, undiversified wealth lies squarely within their own businesses.  

So, why do I not remember my advisor’s name?

Given the above that shows how professional financial advisors should have an enormous impact on their client’s future financial success, I have to ask why so many people don’t remember their financial advisor’s name.

Reasons could include:

  • They have not heard from/spoken to their advisor in a while.
  • They feel that their financial situation is relatively straight forward / don’t need much guidance.
  • They do not see much value add / active involvement from their advisor.

A good financial advisor will take the time to get to know you, understand your challenges, and would want to know about the highs and lows in your life. Clients who are serious about building their personal financial wealth and independence, should engage and acknowledge that a financial advisor is their partner on this journey. Do not underestimate the value that a trusted, trained financial professional could contribute on this journey.

Change your life by putting your financial advisor on speed dial.

ADVISOR PROFILE

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