31 July 2018
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dvances in technology have resulted in an expansion of options available to clients, such as digital financial planning and guidance tools, or robo-advisers as they are commonly known. Despite this, the financial adviser’s role remains increasingly important, especially if we aim to significantly improve the poor savings culture in our country. South Africans are among the worst savers in the world. Despite several ongoing interventions implemented by various organisations, including government and the private sector, the dial does not seem to be moving. The advent and adoption rates of these digital financial planning tools in developed markets are fairly high. However, in developing markets like South Africa, where financial literacy remains relatively low, such adoption rates have not materialised. While these digital financial planning tools are by their very
Advisers can contribute to improving savings culture in SA
nature intended to bring simplicity to creating and executing financial plans, clients may still need or prefer the assistance of a financial adviser. These tools are fundamentally based on complex financial terms, calculations and conclusions – including the tax implications that may create an added layer of complexity, and that an average client may not fully comprehend. As a result, a financial adviser will need to be knowledgeable about the various tools available in the market, including their unique selling points,
capabilities and service offerings. Armed with this information, a financial adviser will be better equipped to answer any queries their clients may have about these tools. Furthermore, a client should not use these tools in isolation of their financial plan. It would therefore be in the client’s best interest to first create a comprehensive financial plan in consultation with an adviser before engaging in activities that may lead to any sort of financial contracts. Moreover, these digital financial planning tools are designed predominantly for use by the younger generation. Therefore, financial advisers need to ensure that there is a special focus on this market as it naturally requires a fair amount of financial guidance due to lack of experience and knowledge in managing their personal finances. Historically, unnecessary personal debt is most probably one of the biggest thieves of financial security within this market, largely due to instant gratification.
In this regard, the role of financial advisers remains key to ensure that the younger generation is geared towards long-term intergenerational wealth. Through appropriate interventions at this level, a financial adviser can contribute to improving the poor savings culture in South Africa. Ultimately, the journey to financial freedom starts with a comprehensive financial plan created with the assistance of an accredited financial adviser. And while the digital financial guidance tools can help to improve accessibility to financial solutions, they should not be used independently to a financial plan. The information, opinions and any communication from PPS Investments, whether written, oral or implied, are expressed in good faith and not intended as investment or financial advice, neither does it constitute an offer or solicitation in any manner. Furthermore, all information provided is of a general nature with no regard to the specific investment objectives, financial situation or particular needs of any person.
SASI calls for employers to assist with saving
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he month of July is Savings Month in South Africa, a campaign led by the South African Savings Institute (SASI) and supported by Absa and the IDC, with a focus on driving awareness around savings issues that contribute to the financial wellbeing of the South African consumer. In the quest to find alternative financial solutions for South Africa’s dire savings rate, this year the spotlight falls on how employers can play a vital role in assisting cash-strapped employees to save. The 2018 SASI July Savings Month Community Campaign will be taken to grassroot communities, stokvels and tertiary institutions. “As South Africans struggle under SAVING increasing financial pressure, a savings MONEY IS buffer becomes even ESSENTIALLY A more important, yet BEHAVIOURAL there is less focus on savings and people CHANGE are increasingly using credit to fund their basic needs, getting caught in a vicious spiral of debt from a young age,” says SASI CEO Gerald Mwandiambira. “For those that can save, it is important that they use all the
instruments available to improve their long-term financial sustainability.” Mwandiambira says saving money is essentially a behavioural change, and this is behaviour that employers and HR professionals can help guide. “HR professionals should be educating employees to start building a savings buffer and recommending tweaks such as regularly reviewing and adjusting their pension fund contributions. Employers can more actively facilitate or automate the savings process for those with an income, such as garnish savings options where money goes into tax-free savings accounts and structuring 13th cheques as a savings tool.” Collaboration with partners across all industries, even beyond financial services, is necessary to address savings in South Africa, says Mwandiambira. “The lack of a savings culture in South Africa is a systemic developmental issue, and no single organisation holds the resources – financial, intellectual or skills – to address a problem of this magnitude on its own. Collaborative efforts from active corporate citizen companies such as Absa have the potential to deliver results on a bigger scale,” he adds. According to Thami Cele, head of Savings and Investments at Absa Retail and Business Banking,
research shows that there are clear benefits for employers as financially stable employees tend to be happier and more productive. “We know that savers with a savings buffer of up to three months income enjoy improved emotional wellbeing, greater resilience to external market shocks and, importantly, an increase in productivity at work.” Research commissioned by Absa to uncover the interplay between savings and happiness will be launched to the market next month. Mwandiambira believes we need to move away from negativity around South Africa’s savings rate to develop innovative savings alternatives and reinforce positive savings behaviour. “Savings Month has been designed to remind consumers to strive towards financial freedom or remain continuously vulnerable. Cultivating a culture of savings and promoting alternative savings solutions in all spheres remains the focus of SASI and our dedicated partners.”
SASI CEO Gerald Mwandiambira
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SAVINGS MONTH FEATURE
TANDISIZWE MAHLUTSHANA Executive of Marketing, PPS Investments
SAVINGS MONTH FEATURE