Nedbank Financial Planning

Do you have a question you would like to pose to a Nedbank Financial Planner? We will be very happy to answer your questions via email or, where specific advice is required, arrange for one of our Planners to contact you directly. Please send your questions to NFPClientQueries@Nedbank.co.za

We will endeavour to respond within 72 hours.

Here follow typical examples of the most frequently asked questions, and their answers.

What type of investment products would a Financial Planner offer?

You generally have access to a large range of product types when investing in the financial planning environment:

• Life wrapped investments (traditionally known as endowments and more recently including the newer generation type of products such as sinking funds and open ended investments).
• Collective investments (traditionally known as unit trusts, linked annuities and LISP?s)
• Retirement Annuities (used for investing for retirement)

The difference between these products is simply that they cater for different needs and are structured differently. Unit trusts and voluntary LISP products provide more opportunity to access the funds invested whereas the life wrapped investments have limited access in the first 5 years. Investments for pre and post retirement also have limited accessibility.

How are fees derived on my investments?

As a general rule, the higher the level of management the product requires, the higher the cost.

How fees are structured are generally the same in nature. The product would consist of an investment vehicle, for example either a life wrapped investment or unitised investment, and an underlying fund, that is the actual fund you are investing in (eg a Global equity or Balanced fund).

There are fees for the fund managers to monitor that the fund is aligned to the mandate. This fee is usually expressed as a percentage charged annually based on the value of the fund.

In addition to this the product house (ie the manager of the investment vehicle, that may or may not be the same as the manager of the underlying fund) also charges a fee for the administration of the products. This is not applicable when investing directly into a unit trust investment, however it is applicable on life wrapped and LISP investments. This fee is also charged annually.

There are also fees that are payable upfront for investing into these products. The underlying fund may charge for buying into the particular fund (referred to as the buy and sell spread for Unit Trusts).

A fee may also be payable to the advisor that provided you with the intermediary service. This can be taken upfront or over the term of the product.

It is important that you understand the impact that these fees may have on your investment. Also understand and agree in advance what services you will be entitled to for the fees that you are paying.

What is the most appropriate risk vs. return ratio for me?

Ideally your financial planner should complete a risk analysis for you. This should not be limited to your risk profile but should also include your personal circumstances. Alternative methods of determining the ideal risk tolerance can also be used where the risk is linked to the return required on the investment.

Whichever method is used, look at the history of the selected fund before aligning yourself to the risk associate with that investment. It is important that you understand that the return that you may expect also carries a reciprocal loss possibility. Understand what the possibility of loss of capital is on the fund and ensure that you are willing to align yourself to such losses when the markets may be under performing.

What benefits do my group life hold for me?

Your group benefits may offer life, disability and trauma type benefits. These are provided at a bulk rate and may be substantially cheaper than if you had taken out your own cover. It is however important that you do not link all your risk planning to the benefits provided by the group cover provided by your employer. You may not always have an employer that provides such benefits and risk cover is more expensive the later in life you purchase it.

Who should I entrust with my financial planning?

Ensure that you are provided with financial planning by a reputable institution that is well known. You should deal with an institution that can take responsibility for the advice provided and that will be around five or ten years down the line when you realise that the advice provided may have been inappropriate.

What is the best investment?

The best investment is the investment that you fully understand. If you are unsure about the mechanics of the product, it will be very difficult for you not to be emotional about the investment when the investment does not perform according to your expectations. Remember that all investments have a place in the market depending on the needs of the investor. Ensuring that the product is correctly aligned to your needs rests entirely with you. Your advisor should assist and provide you with guidance but remember that you are the one who will carry the cost, losses and gains associated with the investment. If your advisor is not willing to take the time to ensure that you understand the investment, find one that will.

How do I take control of my debt?

Pay off the most expensive debt first and remember, every little bit counts. Do not postpone reduction of debt until you have ?enough? to pay toward the reduction of your debt. You should not be taking out new investments unless your debt has been paid. Exceptions to the rule do exist but it is seldom more beneficial to invest than to pay off your debt.

Do not create more debt. Learn to restrain yourself. Would the purchase make a difference to your life a year from now? Then do you really need it?

Budget and keep to it. And remember to plan for unforeseen events.

Is the BWA Investment Fund a good investment?

To ensure that this product range is appropriate for you, you need to ensure that the fund that you select is appropriately matched to the amount of risk you are willing to take. The benefit of this type of investment is the transparency of cost. The fact that there are minimal layers of management of the investments also assists to keep cost limited. Ensure that you understand both the upside and downside of the historic performance and benchmark of the fund that you may select. Should you require financial advice on whether to invest in this type of investment it is suggested that you consult your financial planner.

If you do not have a financial planner we will be happy to refer one to you. Send your request to Nedbank Financial Planning at NFPClientQueries@Nedbank.co.za