Where can a blue-collar worker find a suitable financial planner?

I consider myself a normal ‘blue-collar, working class’ individual with an average monthly income. I have managed to save some money and now need to invest this money so that it can grow and at least beat inflation. Currently, it is resting at a bank with less than perfect interest. I find it very difficult to find a trustworthy company that can both give advice and invest/manage the funds.

The listings of financial services providers on the internet and just in general are overwhelming, and selecting a suitable/reputable company is not an easy task. My search indicated that companies tend to rather cater to higher-income families, individuals or entities. They seem to be interested in helping with investments where the value exceeds R1 million. Though I have much less than this, I feel that these are my hard-earned savings and that it is significant from my point of view – perhaps the starting point of something great. 

My question is thus this:

1. How do I find and choose a financial partner that can assist me with my financial needs; how do I pick one of the many options out there?
2. How should these funds be invested to ensure maximum growth over the next five years?
3. Any references?

Starting your financial journey can definitely be daunting and overwhelming – but the fact that you are starting to make this a priority in your life is fantastic. The most important first step is just to start, the earlier the better, as this will take off quite some pressure in the longer scheme of life itself. You will grow into this portfolio, adding and possibly removing, making changes as your own life and priorities change.

There are definitely a few guidelines for choosing the right advisor, and doing this right from day one will save you some time in future. You’ll be certain that you have received suitable advice and that you are investing in the best products for your current needs.

1. The first step – choosing an advisor/portfolio manager

I advise choosing one of the larger, well-known investment platforms as these companies all have a reputable name in the industry. They have well-structured support teams, sufficiently qualified and experienced advisors, legal and technical teams to support with more complicated queries, and strict compliance regulations. These factors ensure that you are protected and will receive the best possible advice for your needs.

I always advise choosing an independent advisor; this means the advisor can work with any possible platform or product in the market and is not only advising on the product of the provider they work for. This ensures independent advice, and you can be certain that the advisor will be advising on the best product that is available in the market at that time. You will also gain flexibility – as these products can be changed in future, but you can remain with the same advisor.

In the ideal world, the longer you can stay with one advisor, and really take on your personal financial journey with them – the better. This will ensure a more personal relationship, and speaking from an advisor’s perspective – this makes it so much easier for us to provide excellent advice, because we know what your goals and fears are, what your family’s needs look like, and what your dreams are.

2. Starting off your portfolio

This step can be done with the guidance of an advisor, but I advise doing some thinking and preparation on your own as well. What exactly are your short-term and long-term goals?

• Is there something specific you are saving for? Like a car or a home? How do you see your shorter- and longer-term future?
• Shorter-term planning will include planning for a car, a home, educational savings if you have children, perhaps even a holiday or a wedding, or paying off a student loan.
• Longer-term planning consists of retirement planning, setting up a tax-efficient portfolio, paying off debt, and ensuring you have an emergency fund in place.

Different products in your portfolio will be required with time, as they will each be focusing on a different need:

• A retirement annuity will be an excellent place to start saving for retirement – perhaps your employer is also offering employee benefits, including a provident or pension fund? The contributions to these retirement products are also tax-deductible which is a great added benefit. This investment can only be accessed for the first time at age 55 – where certain rules will apply. This is suitable for a longer-term, retirement-focused plan.
• A voluntary investment or a tax-free investment (or in many cases both with time) will be used to provide some accessibility in your portfolio – perfect for an emergency fund. This will also be an excellent way of diversifying your portfolio.

3. Structuring your portfolio

The different goals you have in place will determine how your investment portfolio will be structured. Shorter-term goals will be structured more conservatively – cash- and bonds-based, very much like the savings you currently have in the bank. This asset class definitely has a place in your portfolio as there is no market volatility – so for shorter-term goals, this will be suitable. But lower returns can be expected.

Longer-term savings will provide the advisor with the opportunity to diversify more. This means more asset classes can be included, including equity exposure, local and offshore (also referred to as growth assets) – these asset classes are however more volatile. So market fluctuations can be expected, but these are also imperative asset classes to ensure a return outperforming inflation over the longer term; real, tangible inflation, if you take into account medical inflation and so on. This will be the only way to ensure you have sufficient provision in place for retirement.

Starting your investment portfolio early in your working career is the best way to ensure you do not have to play ‘catch up’ with retirement savings later in life. As important as a suitable advisor and product will be, it is equally important to ensure that you are also putting in the work from your side – ensuring you are saving in a disciplined way and increasing these savings annually in line with inflation, and your higher earnings.

Lastly, to answer your question about referrals, as mentioned I advise choosing an independent advisor, working for one of the larger firms in South Africa. Firms such as PSG Wealth, Ninety One (formerly Investec Asset Management) and Allan Gray will refer you to an independent advisor in your region, or any other firm with a well-established, reputable name in the industry. You can definitely have a look at the advisor profiles on Moneyweb as well.

This article first appeared on Moneyweb and has been republished with permission.

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