What are you paying for?

With the recent announcement of some higher-than-expected increases to medical cover products for 2017, many people are reconsidering their medical cover for the immediate future and re-assessing their financial plans to ensure that they are still working with the best portfolio for their lifestyles, their families and their businesses.

Whilst the year-ahead increases will cause some to question what they are paying for in medical cover, the larger question – one that is much older than the passed few weeks – receives new vitality. That is: What are you paying for?

The financial planning industry (our industry) is currently undergoing some strategically significant changes to bring clarity to that exact question. This change is called the Retail Distribution Review (RDR).

The first phase of RDR is set to arrive on 1 January 2017.

The reason for introducing RDR in South Africa is because the old models for giving advice and selling financial products have created a number of areas that need to be addressed.

RDR is an attempt to focus on the advice rather than the products. One of the key objectives of RDR is to create sustainable business models for financial advice, similar to those of medical and legal advice.

Financial advisors have something far more valuable than just policies or fund wrappers to offer, that is, a financial planning model in which the client is treated more holistically.

“RDR is not about regulation,” said Brian Foster, the co-founder of Beyond RDR. “It’s about business models. We have been running a business model that’s been broken for a long time. Now is the time to change it.”

“You come into the industry by learning to sell policies,” Foster said. “The industry has trained us with this industrial mindset. They build these factories, and send us out to distribute their products. That’s industrial age thinking.”

“I don’t think people buy a financial planner,” Foster said. “But if you ask someone whether they would like you to help them to have the lifestyle you want without running out of money, they will buy that.”

I’m here to help you live the lifestyle that you want – comfortably. Let’s get in touch.

Quotes from MoneyWeb

Life insurance in my 20’s… seriously?

Whether it’s a student loan, vehicle financing or retail credit accounts, it’s likely you’ve incurred some form of debt in your early 20’s. It’s easy to understand why life or disability insurance may feature at the bottom of your list of priority expenses. However, there are rather compelling reasons to buy risk cover while you’re young, in your prime and insurable.

There is a common misconception that you don’t need insurance because you’re young and healthy. However, have you considered that getting insurance will be cheaper and easier while you’re young and healthy?

Insurance premiums are influenced by factors such as your age, gender, the condition of your health and your occupation. If you’re in good health your premiums will be considerably cheaper at the age of 25 than when you’re 35.

You are also able to add extra benefits to your policy such as guaranteed insurability later in life when you may want to increase your cover as well as premium waiver cover whereby your premiums will be paid by the insurer if you are no longer able to earn an income due to disability, dread disease or retrenchment.

According to Statistics SA, South Africans in their 20’s have a higher risk of becoming disabled or being killed as a result of a car crash than any other age group. If your parents, or a relative, signed surety for you then they will be exposed to your debt burden should you pass away.

The first risk cover you should buy in your twenties is disability cover because not only are you at a higher risk of becoming disabled, but you also have the most to lose in terms of potential earnings.

As Benjamin Franklin said, “By failing to prepare, you are preparing to fail.”

Having financial protection already in place will protect you and your family from financial turmoil should you fall victim to a life-changing event such as death or
disability.

Need cover? Let’s get in touch.

Choosing your medical plan for cancer

Cancer is one of the leading causes of death in South Africa and may become even more prevalent – medical journal, Lancet, predicts a 78 percent spike in cancer cases by 2030.

Despite the prevalence of the disease and the high price tag associated with cancer treatment, medical aid schemes in South Africa do not automatically cover all treatment costs.

Comprehensive medical aid options that provide cover both in and out of hospital usually have unlimited oncology benefits or limited but with a good overall amount. However, this doesn’t necessarily mean that all expenses will be paid for in full.

Instead, medical aid schemes pay providers at scheme rate, or in some cases 200 or 300 percent of the scheme rate. This rate may be a lot lower than the one healthcare providers actually charge, in which case members have to cover the remaining costs when designated providers are not used.

More affordable medical aid options offer limited oncology cover. Once the limit has been reached, any additional payments have to be taken upon by the member (in most cases). Furthermore, schemes have the right not to cover the costs resulting from non-PMB cancers where it has been stated.

If a cancer is considered a PMB condition (Prescribed Minimum Benefits – defined conditions and treatments which must be provided, by law, to all medical aid scheme members and beneficiaries in full and without co-payment, regardless of the benefit option selected), a medical aid scheme is legally obliged to continue paying for treatment at cost, even if the oncology benefit limit has been reached.

In order to limit PMB expenditure, medical aid schemes can insist that beneficiaries consult specialists and use hospitals in their networks. Low-cost medical aid options may limit members to treatment at state facilities only. In addition, each medical aid scheme covers only medicines listed on a scheme formulary (an official list giving details of prescribable medicines). Entry-level plans typically cover the cost only of generic alternatives, rather than of more expensive branded medicines.

When is cancer considered treatable?

According to the Medical Schemes Act, cancer is considered treatable when:

only the organ of origin is affected and there is no spread of the disease to contiguous organs, or
the organ of origin and other life supporting organs and systems have not been irreparably damaged by the cancer

Before you subscribe to a particular medical aid scheme or plan, it’s a good idea to investigate the cover it offers for cancer treatment. Among the issues you should consider are:

the monetary value of the oncology benefit per beneficiary per year
what specialised treatments or biologics, if any, are covered by the benefit structure
whether cover for oncologist and specialist consultations is limited
the scheme’s cancer treatment protocols
whether the scheme permits plan upgrades at any time during the year.

Need to review your cover? Let’s meet up!

Teach your children about financial goals

Preparing your children for their financial future is one of the greatest gifts you can give them. For many parents, talking about money can be an uncomfortable subject and discussing finances with your children can feel both personal and scary, but they need to learn if they are to make wise decisions concerning their own finances.

It’s best to start teaching these lessons early on in life, if you think about teaching manners or language, it would be near impossible to start teaching these fundamentals in their teens.

SET SAVINGS GOALS
A good way to start is with goal-based savings – liquid cash doesn’t mean as much to a child as, say, a new Barbie or Hot Wheels. It is also important because later in life they will understand that it is easier to save and invest if you have a goal to work towards.

VALUE OF EARNING
You have to teach them the value of work. Earning money doesn’t just happen, you have to make it happen. Whether you are granting them a gold star on a chart for doing their chores or putting R5 into their piggy bank for washing your car – the same concept of gratification applies.

SET REWARD TIERS
Reward tiers also help, so that they can decide if they want to cash-in now or save up for a bigger reward – it’s this kind of reasoning that will help them later on.

If you can convince your child, once they hit their teens and are wanting the latest gadgets, that it’s better to invest R10 000 rather than having the new iPhone then you know they are on the right track. The value of that phone will have diminished significantly over a couple of years, but that sort of investment over a decade or two can make a big difference.

It also comes down to values. By having a goal that they are working towards you are teaching them that it isn’t the money that they are working for, it’s the end-goal. It’s not about being rich, it’s about the lifestyle that we’d like to have.

Need to review your financial goals? Let’s get in touch.

A woman’s will

Happy Women’s Day for tomorrow!

In celebration of Women’s Month I wanted to share an article that focuses specifically on a financial planning aspect that is often overlooked for women. Recently, the Fiduciary Institute of Southern Africa (Fisa) discussed some important financial planning considerations for women that highlighted the need for an up-to-date will.

It is estimated that at least half of the estates reported at the Master’s Office each year are of people who died intestate (without a will). This is largely due to the fact that South Africans often don’t see the need to draft a will, especially when they are relatively young or don’t have a significant asset base.

It is important to note that men and women living together are not automatically treated as ‘married’ under the law in case of intestacy. Couples who live together without getting married often assume that the law treats them as married, this is not necessarily the case.

The bottom line? You need your own will and have to understand the implications of your partner’s estate planning.

Fisa often finds that where a woman does not have a lot of assets, or leads a busy life, proper estate planning is neglected. Where estate planning is done, it is important to not only consider current circumstances, but to plan for the future.

The Intestate Succession Act applies to every South African who dies without a will and stipulates that the estate should be divided according to a specific formula. If the person was involved in a relationship other than marriage, the type of relationship will determine whether the partner will be allowed to inherit.

In terms of the Act partners need to be regarded as a “spouse” in order to inherit in the case of intestacy, but the term is not defined in the Act. As a result, other legislation and court cases have to be consulted for an explanation.

Historically, a marriage entered into in terms of the Marriage Act was the only recognised spousal relationship, but with the introduction of the Constitution, the legal system acknowledged that people in other types of relationships were entitled to protection.

Williams says as a start, legislation was passed in the form of the Customary Law of Succession Act and parties to traditional marriages under black customary law are now regarded as spouses when dealing with an intestate estate.

Court cases have also extended the definition of a spouse in this context to include monogamous Muslim and Hindu marriages and polygamous Muslim marriages.

In terms of a Constitutional court ruling, same-sex partners are also regarded as spouses for purposes of intestate succession.

The law allows parties to have a joint will, but Fisa usually advises against it. There have been isolated instances where the surviving spouse dies and the Master’s Office battles to trace the original will that also applies to the surviving spouse.

It is crucial for partners in a relationship to ensure that they draft wills to protect one another.

If you would like some advice on how to go about setting up your will, I’d be happy to advise you on this.

* This content was sponsored by the Fiduciary Institute of Southern Africa.

Source: moneyweb

The power of positivity and a good plan

Have you ever told yourself, “When I have more money, I’ll be happier”? How about, “I’ll never be able to pay off this debt”? These sort of toxic money thoughts are holding you back from financial success – and happiness! A good financial plan needs to be attainable and measurable, those expressions are neither.

The first step to a financial plan is both the hardest and the easiest – it’s the starting point. The point where you measure how deep you are so that you can calculate what you need to do to get where you want to be. Measuring your budget is usually a huge relief for most people, your finances are no longer a mystical figure floating in the ether, you have defined an attainable and measurable goal.

You need to rescript your brain into thinking positive and actionable thoughts. Here are some tips to help you along your way:

Get good advice
Getting good advice and being reminded that what we want to achieve IS attainable does wonders for an attitude of success. However, you will also need to keep your end-goal in mind.

A good way to do this is to pick out a positive phrase that acts as a sort of rule-of-thumb. For example, “Is this [potential purchase] better than a family vacation / new car / bigger apartment?”

Don’t Rush
One study showed that the farther away a goal seems, and the less sure we are about when it will happen, the more likely we are to give up. Consistency is key.

Use numbers and dates to measure WHEN you want to achieve your goals by. And work out some smaller, short-term goals along the way that will reap quicker results. Paying off debts or saving a certain amount, for example, can leave you with a great feeling of pride and accomplishment. This increases the likelihood of you keeping up your good financial habits.

Dig in your heels
Not next week. Not when you get a raise. Not next year. Get started today – and don’t let up!

Need some good advice? That’s why I’m here. Let’s get in touch!

Cancer claims reveal risk trends

Recent statistics made available by Liberty Life reveal that cancer is the leading cause of claims paid by the assurer in 2015. One in four claims paid by Liberty were for cancer, and the proportion of claims for cancer is increasing, even at younger ages.

Motor vehicle accidents are typically cited as the reason that young people need disability or income protection cover, but cancer was a greater cause accounting for 12.3% of claims (motor vehicles accounted for 11.9%). Even more worrying is the fact that in young parents, cancer was the cause for claim for 22.5%.

These statistics are for claims on policies that provide cover for death, disability or dread disease (illnesses such as cancer, strokes and heart attacks). The fact that many people now survive cancer means that most of the claims were paid as a result of severe illness and not as a result of the life assured dying.

Liberty’s claims-payments for severe illness cover increased by 50% from 2014 to 2015. This was not only due to the fact that more people are taking out this cover, but also because of the growth of awareness and early detection of cancer.

Liberty was not alone in their findings. Sanlam’s claims-statistics for 2015 show that 60% of its dread-disease claims were for cancer. At Momentum, 34% of its dread-disease claims were for cancer. At Discovery they were 38%. And at Old Mutual, 57%

An interesting statistic put out by Old Mutual with its claims figures is that 60% of all claims were for people under 45.

You may ask yourself why, if you already have medical scheme cover and loss-of-income cover, do you also need severe illness cover for cancer?

A medical scheme offers crucial cover that you shouldn’t be without. The problem is that cancer treatments are expensive and schemes have rules about what they do and do not pay for. Sometimes a doctor will recommend the best treatment available but a scheme only pays for a more modest treatment or there is a diagnosis of a rare form of cancer that requires specialised treatment.

These statistics show that cancer is still a widespread affliction, even at younger ages. While cancer claims are obviously higher among older age groups, even 20- and 30- somethings should be prudent when it comes to taking out risk policies.

If you have any questions or want to review your policies then give me a call and let’s meet up.

Source: iol

What happens after a market downgrade?

There has been much murmuring in the financial field as of late regarding queries with respect to investing locally, or shifting all portfolios offshore, specifically in the light of the widespread media coverage and speculation regarding South Africa’s credit rating and the likelihood of a downgrade to “junk status” – which could happen as soon as the third quarter.

While there is some speculation about when it might happen the general consensus seems to be that it is no longer a question of “if”, but “when”. It is thought that South Africa’s sovereign debt rating will be cut below investment grade in either June or December.

Why is this happening and what does it mean?

As I have been following, South Africa is facing a downgrade for two reasons:

Slow growth – along with the rest of the world, SA faces lower levels of growth than forecast (and these forecasts continue to fall). There are a multitude of reasons for the slowdown including depressed commodity prices and reduced global demand for commodities, but also a lack of willingness to invest with all the current uncertainty around government policy.
Fiscal outlook – effectively this relates to the ability of the country to control spending given the tax base so that excess spending does not need to be covered by issuing more debt. With low growth and high unemployment, tax revenue is under pressure and spending on benefits is rising. The government’s target to limit gross debt to 50% of GDP is going to be very difficult to achieve.

Many experts have suggested that the immediate impact of a credit downgrade would be a flight of capital, a spike in bond yields, rapid currency depreciation and a fall in equity markets. However, looking at a historical analysis of emerging markets who suffered a similar downgrade returns a somewhat unexpected trend (based on a group of emerging markets that had all been downgraded from investment to sub-investment grade and their performance in the 12 months before and after the move).

Markets are very good at anticipating what is going to happen, in the period preceding the downgrade they tend to perform poorly, but after the fact they gradually perform better – generally speaking.

The trend is clearly that yields expand leading up to a downgrade, but generally recover afterwards. The average currency on a real effective exchange rate basis tells a similar story, increasing relative to where it was at the time of the downgrade.

Countries that are downgraded to sub-investment grade go into recession, almost without exception. It takes years to earn back their credit rating. This is the real challenge that South Africa faces, the policy response will be critical.

Investors should not be overly influenced by the short-term commotion, but rather set their sights further on their investment horizons. There is a tough road ahead, but it is a difficult year for local and international economies alike.

I realize that this blog contains a large amount of technical terms and concepts – if you’re concerned about your investments or would like to discuss off-shore options – then let’s get in touch!

Source: moneyweb

Investing in your fifties

Many young people neglect to plan for their retirement during their early working lives, arguing that they will take care of it later in life when they are earning a bigger salary. However, on the flip side of the coin, as people get older they assume that they must rebalance their portfolios into more conservative investments.

Luckily, most people are choosing to retire later in life.

If you have left investing in your retirement until later in life, there may be a risk in investing too conservatively (not enough exposure to growth assets like shares and listed property) as your investments need to continue to outperform inflation in retirement. Alternatively, you may be tempted to invest in very risky investment schemes. It is really important to construct portfolios which have clearly set out objectives that will be able to meet the targeted return before and after retirement.

How much income do you need per month? Will you need to buy a new car or fund a holiday? You need to know exactly what your retirement goals and dreams are. This will give you an accurate indication of how your assets have to be invested to cover these expenses. You need to be comfortable and knowledgeable about your retirement. You should know exactly how much money you can safely draw to enjoy your retirement without eroding your capital base.

One of the most important things to try and achieve by the time you retire is to be free of debt. You don’t want to be in the position where you have to settle a mortgage or other debt with retirement capital.

Just because you are retired it doesn’t mean you should stop working. Instead, you should re-focus your sights on a pursuit of happiness. People often still make money during retirement. With a lifetime of experience behind you it wouldn’t make sense to not stay busy. View this as the time you have been waiting for to do something you have always wanted to do, but felt like you never had the time to do. Who know, it may turn out to be a successful business venture.

If you need some help working out a retirement plan or would like to revise your current plan give me a call and we can work something out.

Financial Fortifications for Forty Somethings

It’s often said that the best years are the forties – and for so many reasons! Whilst everyone is different, it’s good to state at the start of this article that this perspective is becoming even more prevalent.

Some forty year-olds are in their first marriage with kids, others are in their second or third… with kids. Some have never been married and have no inclination of doing so. These situations place people in very different landscapes, but they all have one thing in common – over forty years of life behind them.

It poses a unique opportunity to view the ‘hike up the mountain’ from a higher perspective than before, and with the goal of retiring even closer in sight than it was in your twenties and early thirties. It’s healthy to pause and reflect, but it’s crucial to then keep on moving forward!

Forty-year olds need to prioritise staying on top of their finances as this is often a time of higher rising costs – regardless of your life choices.

Here are four quick things to consider!

Managing money and investments in your forties

There are often various significant demands on your time during your forties from building your career and family, which means that many investors in this age demographic don’t set up a proper financial plan or neglect to review the plans they already have in place.

If your employer is not contributing to a pension or provident fund for you, it is critical to save for your own retirement and to utilise the tax deductions allowed by SARS in full to build up tax-efficient, inflation-beating long-term investment savings over your working life.

Risk cover should be a priority

In your forties your biggest risk is that you will lose your ability to continue to generate an income. If you don’t belong to a group life scheme through your employer’s retirement fund, it is really important to ensure that you own a personal risk income protection policy to provide adequate cover for your needs.

If you cannot generate an income it also means that you can’t save and invest. If you are unable to work and earn regular income due to an accident, illness or disability event it could turn out much more expensive than to untimely pass away. It is therefore important to ensure that you have adequate cover, including disability and dread disease cover, and to review it as you earn a bigger salary over time as your lifestyle expenses will also increase.

You should also ensure that appropriate medical (health care) and short-term insurance cover is in place and is sufficient for your specific needs.

Tertiary Education Saving

One of the most popular options for this savings goal is the National Treasury’s “new” tax-free savings account (TFSA). Individuals (including minors) are allowed to invest up to R30 000 a year (up to a lifetime limit of R500 000 per person) in a TFSA that can grow tax-free.

It is also more flexible than approved retirement funds as it is fully accessible before 55 and not limited to the Pension Funds Act’s Regulation 28 asset-allocation rules. However, this TFSA is not a replacement for a good investment-linked retirement fund vehicle.

These TFSAs are excellent long-term savings vehicles and investors have access to the money prior to retirement. The longer the investment time frame, the better. It will take roughly 16 years to reach the lifetime capital contribution limit in these accounts.

Play catch up with your RA

Some forty-year olds may only be beginning to save for their retirement. There are strategies to accelerate your savings plan – but you need to meet with a qualified financial planner.

An appointment with a qualified financial advisor for a wealth planning diagnosis is similar to visiting your medical doctor for a regular health check-up.

If your health state has never been checked to see if you are at risk for cancer or other serious diseases, you would never know if you have a reason to intervene and adapt your behaviour. This is also the case with financial planning. If you haven’t done any retirement planning needs analysis and if you do not have an appropriate strategy in place it is important to see a professional financial advisor to assist you in drafting an integrated lifestage plan and to assist you to implement it according to your priorities and goals.

In performing the financial needs analysis to identify shortfalls concerning specific areas of importance an independent financial advisor worth his/her salt can add considerable value with sound guidance and by offering appropriate alternative solutions.

Are you in your forties? Do you have friends who would benefit from this article? Please feel free to share it with them – or get in touch through my contact page!

Several points for this article were taken from: source