If your financial adviser offers you a full financial plan that covers all aspects of your financial life, you will need give him or her deep insight into your financial affairs.
This includes sharing information on your goals and aspirations, your debts and household budget, your income and employee benefits, your medical conditions and those of members of your family and your relationship with your spouse or partner.
The adviser will then use all that information to determine how best you can reach your financial goals. You can expect your financial plan to cover:
Managing your finances
This may include setting up a budget and managing your debt so that you only have good and manageable debts. If you are overindebted you may be referred to a debt counsellor. Your plan should include providing for an emergency fund to ensure you do not incur debt or further debt if an emergency arises. Read more: How do I set up an emergency fund?
Insurance
Your plan should outline your insurance cover for your life, and should sketch what will happen under various scenarios – if you die before retirement, fall ill or are disabled. If there are shortfalls, the plan should recommend how you can plug these gaps. Read more: How much life cover do I need?, How much lump sum disability insurance do I need? and Do I need income protection?
Your plan should also consider short-term insurance for your possessions and whether you are at financial risk as a result of being underinsured.
If your adviser is licensed to advise you on both life and disability insurance as well as cover for your assets, you may get advice on both. However, often you will be referred to a broker who specialises in insurance for your home, car and other possessions.
Health care
Your financial plan should analyse what you need to fund your health-care expenses. If you are not adequately covered, your plan should outline the risks and should provide a solution or refer you to a specialist medical scheme adviser.
Retirement
Your financial plan should record your goal income in retirement and outline how much you need to save to retire with that income. You and your adviser may come to a workable compromise on this if the amount you need to save is currently not affordable. Your adviser may recommend working longer, retiring on less and saving more in retirement products such as a retirement annuity or other investments such as unit trusts and offshore investments, depending on your tax situation and your future needs.
Investments
Your financial plan should include all your investment goals and outline the returns you need over your investment horizon, and how much risk you can afford to take. Based on this, it should recommend suitable investment portfolios.
Tax
Your plan should set out how you can legally structure your affairs to take advantage of tax deductions or to invest in tax-favourable investments. Your adviser should recommend a tax practitioner if you need help filing your tax returns or if you have complex tax issues that require specialist advice.
Estate planning
Your financial plan should record whether you have a will and whether it is adequate or if you need further help drafting it correctly. Furthermore it should address what will happen when you die. It should show what income your family will have, what expenses will arise in your estate and how they can be paid, and what assets will be left to your heirs.
You should be assured that your estate can be finalised with the least hassle and that estate duty will be minimised.
Your adviser should not only give you a written copy of your plan, but should also present it to you and ensure you understand it, the recommendations made and their implications.
