Every now and then, we meet clients who left their current Wealth Manager and has asked us to review their portfolios or even just require a second opinion.
Sometimes the client has received good advice but often we are shocked by what we see. The client blindly puts their trust and lack of understanding in the hands of a “professional”.
This leads me to a recent encounter I had with a new client’s portfolio. This is client “X”:
- Under 30.
- Savings less than R50k.
- Earns about R200k annually.
- Has zero retirement savings.
- Zero liquid emergency savings.
The client saves over R3000 every month, which is great. What’s shocking is that the Wealth Manager allocated these monthly savings to two Endowment policies.
This leaves client “X” with zero liquidity for the next 5 years, no retirement savings, no tax deductibles and no use of annual interest and CGT exclusions. The wealth manager has also not taken her current taxable income into account and she now pays more tax in this investment vehicle than she should’ve. One might ask if the advisor’s only interest was his own?
This goes to show how important it is not just to get advice, but to get the correct advice. Ask questions about your Wealth Manager’s credentials and the commission he earns. Also ask questions on the proposed investment like, liquidity of the capital, annual fees and tax implications.
Ruvan J Grobler NHCert(Wealth Management)
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