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The newly launched PPS Graduate Professional Index (GPI) revealed that only 45% of the graduate professional respondents have a financial plan in place. Another 48% of the respondents indicated that they simply own a combination of financial products that were sold to them. The study was conducted by PPS, the financial service provider focused on graduate professionals, and received over 3000 responses from its graduate professional members.
Nico Coetzee, Executive of Internal Distribution at PPS, states that it is interesting to note that the majority of the graduate professionals didn’t have a specific financial plan in place. “With financial information freely available in this day and age, most people are not interested in getting product specific information, but are more interested in how these financial products are relevant in their lives.”
Coetzee also points to the Financial Planning Institute’s (FPI) 2015 Global Consumer Survey, which revealed that 58% of South Africans do not have a comprehensive written financial plan in place.
He explains that every person’s financial needs vary during different stages of their life and it is therefore vital to have a tailor-made financial plan prepared to ensure that the person’s financial goals and lifestyle requirements are compatible with their financial situation. “The intention is that the client will not be persuaded to buy products that will result in the most commission for the adviser; but that the client gets the solutions that they actually need.”
Referring back to the FPI survey, Coetzee notes that 76% of South Africans in this survey listed their main reason for working with a finance professional is to come up with a long-term plan that is tailored to their needs.
When asked whether they consider themselves to be savvy when it comes to savings and investments, 75% of the PPS survey respondents said yes. “While most people are simply happy with the investment products that they own, they might not be sure how to convert these investments into a plan for retirement. Most people have basic knowledge about saving and investments but would need the help of a financial planner to set it up according to a specific retirement goal,” says Coetzee.
It was interesting to note that 68% of the PPS GPI respondents indicated that they do involve their partner in their financial planning and decisions, while only 11% stated that they do not involve their partner in their financial affairs (21% indicated they were single). According to Coetzee, many people might believe that they involve their partner in their financial planning, but still have separate financial plans in place and some couples might not even use the same financial planner.
“When it comes to a couple’s financial planning, it is vital that the two people talk collectively about financial matters. For example, when saving for children’s education there doesn’t have to be two separate saving vehicles, because a collective vehicle with compound interest will serve a better purpose. It is important that both people are in the same room when discussing a collective financial plan working towards one goal,” explains Coetzee.
The survey results indicate that it is clear that most South Africans understand the purpose of financial planning, but they still need to get a properly structured plan on paper to ensure that they can achieve their long-term financial goals, he concludes.