Tuesday, September 13, 2016

What is good financial advice?

What is good financial advice?

On its own, advice is just advice and probably not that effective. Let's
consider a retirement annuity, for example. In isolation the product has
many features and benefits which provide many reasons to invest in one.

A main advantage is the tax deductibility of the premiums from you taxable
income. So should every have one? Well, if you are young and just starting
out in your working life, perhaps not yet. You see a retirement annuity
cannot be accessed until age 55. If you need money for a deposit on your
home or a car there is nothing you can do if your savings is in a retirement
annuity fund. You may be better off saving in unit trusts which will give
you accessibility to your money when you need it.

Good advice comes into its own when total retirement provisions are
considered, including pension and provident fund contributions. These place
limits on the amount that can be deducted from retirement annuity
contributions. Having carefully calculated the maximum tax deductibility
would set up an appropriate contribution and any excess could be diverted to
different investments making the overall provisions far more tax effective.
You see, it's not just a product. It's really about taking everything
relevant into account and making a financial decision on your circumstances.

So good advice boils down to appropriateness; advice that suites the
situation; different strokes for different folks. This can only be
accomplished through a thorough and holistic evaluation. It is not about
best but rather suitability.

Good advice is therefore not product focused. It is rather solution focused.
Just like visiting a doctor you are taken through a medical evaluation which
then leads to a diagnosis and then suitable treatment is prescribed. A
CERTIFIED FINANCIAL PLANNER professional will take you through a financial
planning process which will highlight opportunities which will form the
basis of the recommendation. This is good advice. It is not premeditated. It
is objective and appropriate.

Next time you are given advice be aware of the way the advice is delivered.
If it is all about features and benefits, past performance and speculative
opinions into the future then be careful.

A CERTIFIED FINANCIAL PLANNER professional is a trusted professional who
upholds the highest standards in the industry. Your interests are put first
with a CFP professional which translates a plan that really suites you.

Philip Barnard Tel: 021 975 0933 Cell: 083 270 4721

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