A day in the life

Over the past two decades, the professional standards of the South African financial planning industry have continued to rise through the efforts of a number of niche fee-based practices. Together with the Financial Planning Institute of Southern African (FPI), a new generation of professional practices has emerged driven by their common intent to provide unequivocally independent financial advice of the highest standard on a professional fee basis. In return for a professional fee, clients enjoy full access to the advice and expertise of the practice’s tax, finance and legal professionals. Understanding investor behaviour and being sensitive to human emotions forms an integral part of a financial planner’s role as advisor, mentor and guide. What follows next is a typical day in the life of a fee-based financial planner.

For the purposes of this article, we have assumed that Dave is an independent, fee-based advisor, meaning that he earns a professional fee for the advice that he provides to his clients. He holds a B.Comm degree and is a Certified Financial Planning® professional. Dave’s remuneration structure is relatively simple. He charges an upfront fee for the preparation of a comprehensive financial plan. Should the client choose to implement his recommendations through the firm, Dave will earn a pre-agreed percentage of the client’s invested funds per year. From the moment of implementation, the client has unlimited and ongoing access to Dave and his team of tax, financial and legal experts within the practice at no additional cost.

Dave’s first duty of the day is to respond to a query from a long-standing client who is on a permanent disability benefit following a serious car accident five years ago. Dave provides advice to the client on the taxability of her income protection benefit, and explains how this benefit will increase into the future. It’s also the 2017/2018 tax year-end, so Dave spends time emailing a number of investment clients on how to maximise their retirement annuity contributions for the current tax year.

He takes a call from an existing client who has just received a year-end valuation of his offshore pension fund. The client would like Dave to prepare an updated retirement funding scenario which takes into account the updated pension values. This call is followed by a telephonic discussion with a recently retired client who has requested that Dave spends time explaining his latest investment report.

Dave’s first appointment of the day is with a relatively new client to the practice. He has recently retired and is contemplating whether he should downscale his existing primary residence to purchase a smaller retirement home, or renovate a granny flat on the property so as to generate rental income from his primary residence. He needs to understand the costs involved in realising his property and purchasing a new retirement home versus renovating the granny flat. He also needs to understand the tax implications of generating rental income, and how the outflow of capital to fund the renovation will impact on his retirement plan.

Dave’s neighbour, who is also a client of the practice, has asked Dave to meet with her domestic worker on a pro bono basis as a special favour. The domestic worker has been paid an amount of R700 000 from the Road Accident Fund and would like to invest the money for her children’s education. She would also like to have a Will prepared – something that Dave will do free of charge as part of the firm’s social upliftment programme. He has also agreed to run a morning financial literacy workshop for a client company’s lower income earners as part of the CSI programme.

His second meeting of the day is with a very emotional client who has been retrenched from his employer seven months before his long-awaited retirement. The retrenchment was entirely unexpected and the client is ill-prepared to take decisions regarding the proposed retrenchment package. The object of the meeting is for Dave to unpack the financial and tax implications of taking an early retirement versus a retrenchment package, and to guide the client emotionally towards making the most appropriate decisions.

An existing client of Dave’s suffers from major depression to the point where he is unable to remain gainfully employed. Dave spends time counselling the client telephonically and explaining the nature of a claim against an income protection benefit. As financial advisor, Dave’s role is to assist the client in obtaining all the necessary medical reports and paperwork required in order to submit a valid claim to the insurer.

He takes a phone call from a client who is a medical doctor about to become married. She would like to update her life policy to ensure that her husband-to-be is nominated as the beneficiary on her policy. She would also like Dave to update her last will and testament so that her husband is nominated as the sole heir to her estate in the event of her death. The practice’s legal advisor will be responsible for the updating of the doctor’s will as part of the holistic service offered by the firm.

In a particularly acrimonious situation, one of Dave’s clients is contesting the will of her ex-husband whose deceased estate is liable for the ongoing maintenance support of her two minor daughters. Dave and the client’s attorney are in constant telephonic and email contact regarding their mutual client’s claim against the deceased estate to fulfil its duty of care to the minor children. The matter is a complex one involving a poorly drafted will which makes provision for a number of bequests that the deceased estate is unable to meet.

Dave then drafts a report for a young client couple who would like to purchase their first home. They have requested advice from Dave as to how much they can afford in terms of bond repayments, the most appropriate interest rate structuring, the costs of registering a bond, transfer and attorney costs, and how best to facilitate a deposit on the property. His second report for the day has been commissioned by a client who wants to sell a portion of his diversified unit trust portfolio in order to purchase Bitcoin. Dave’s report unpacks the difference between speculating and investing for the long-term, the dangers of crypto-currencies versus registered share portfolios, and how a withdrawal from his unit trust portfolio could affect the client’s financial position in the medium term.

He takes a phone call from a client whose mother has recently passed away and left her a substantial inheritance. The client would like advice on how best to invest the proceeds of her inheritance, how the additional capital will impact on her retirement funding and whether the inheritance would allow her to reduce her working hours so that she can spend more time with her young children. The next phone call is essentially a request for a favour from an existing client who is concerned about the financial advice given to his father. He has kindly requested that Dave reviews the financial advice and provides a second opinion to give him peace of mind.

One of Dave’s more entrepreneurial clients is entering into a business relationship with her best friend, and would like Dave’s assistance in putting a business assurance agreement together. He follows this phone call up with an email to the executor of a deceased client’s estate to make enquiries regarding the finalisation of the estate’s liquidation account. He also provides telephonic advice to a client who would like to make provision in her will for her two sons, one of whom is Autistic.

Dave’s final client meeting of the day is a sensitive meeting with a retired couple and their two adult daughters. The retired couple is under-funded for their retirement and it is likely that, at some point during their retirement years, their daughters will need to contribute financially towards the living costs of their parents. The retired couple has never divulged their financial circumstances to their children. Their daughters, one of whom has borrowed a considerable amount of money from her parents, are not aware of the looming cashflow crisis.

Dave’s last two phone calls of the day are lengthy. The first is from an elderly retired client who wants to withdraw R1.5 million from his investments to invest in a friend’s start-up company. There are limited facts and figures available regarding the proposed start-up and the client commits to sending through the business projections for Dave to review and comment on. The last phone call is with a terminally ill client who would like to review his will and talk about the structuring of his estate.

All clients demonstrate a genuine desire to create sustainable wealth and to gain knowledge regarding their finances. Coupled with this is every client’s unique emotional relationship with money, which in turn influences financial decisions. Armed with the requisite financial expertise, a necessary extension of a professional advisor’s role is that of guide, mentor and counsellor to clients as they navigate life’s turbulences. As Tim Maurer is quoted as saying, “Personal finance is more personal that it is finance.”

Have a wonderful day!



Understanding human emotions is key to effective financial planning





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