Financial Planning and Financial Services Part 1

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by Ashley Seymour

The financial services industry in South Africa is much more than your typical “big five”
banking institutions. From insurance to asset management, there is much more to offer
from the industry than just saving your money in a standard savings account. Learning
about these services, and knowing how to use them wisely, is key to ensuring long-term
returns from your income. There is no need to wait until you graduate, financial services
are a useful tool to get you on track now for your post-university career.
Here are a list of some different financial services to get you started:

Banking:
We all know about this one. Banking is where you hold your money easily, for later access.
When you do this, the bank is technically indebted to you, meaning that you are entitled to
receive your money upon request. However, some banking providers allow you to tweak
this, in order to earn revenue on your savings. For example, if you open a “call account”,
your savings will accrue interest, given the condition that you can only access funds after a
given period of notice.
However, sometimes banks can be creditors, allowing you to take additional income from
the bank on the condition that you return these funds later, with interest. This is called
receiving capital. Most banks allow you to be given some form of credit if you earn a
regular income, and have no outstanding debts.
This however, is where things get tricky, because how much is too much? How can we
trust ourselves to act responsibility with our income or capital, so as to ensure we receive
even greater returns later?
Asset and Wealth Management:
This is where financial advisers come in. Financial advice ensures that your income is
spent wisely, be it on investments or other expenditures, and guides you towards making
sustainable long-term growth with your income. Financial advisers will assess your income
and expenditures, and advise you on the best steps to take in ensuring that you are
making responsible monetary decision. As Rob Barge, PPS’s Regional General Manager
says, “Choosing a good financial planner is a priority step that students and young
graduates should take, probably one of the most important long term investments they can
make.”
It’s important to ensure that you and your financial planner are on the same page, and
that they are equipped (and licensed!) to accommodate your needs and wants.
Insurance:
Insurance is like a giant piggy bank, saved for a rainy day. There are multiple institutions
which provide coverage in the event of a financial difficulty, such as health and home
insurance. This protects you from the event of unexpected asset loss. Your monthly
insurance instalment is determined by your risk profile, which is how likely you are to
actually claim this insurance in the first place. Many FSP’s offer insurance packages, with different benefits and costing, it’s up to you and your financial planner to choose which works best for you.

Investment:
Investment seeks to provide you greater returns from your income. By giving your money
to an FSP to invest it in other’s capital, your risk is rewarded by a dividend of your initial
investment. Technically, you make money by spending money! There are multiple ways to
invest, some of which are more risky than others. If successful, these investments yield
higher long-term income. However, there are multiple services which allow you to invest
wisely, earn dividends, and not be put in too much risk. Many FSPs offer unit trusts, which
allow you to invest your income in a batch of investments, depending on your desired level
of risk and subsequent potential rate of return.

This is just a snapshot of some of the opportunities offered by the financial services
industry. However, it is key that you ensure you start with a financial planner, to help you
along the way. Your planner is there to answer all the questions you may have, and
suggest new opportunities for savings and investment. “Students and graduates should
only work with the best and must be very particular in choosing an FSP!” says Barge

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