Personal Financial Planning in South Africa -- June 2007

Personal financial planning
Clem Sunter, the scenario planner and strategist and former Anglo American Gold Division chairman, spoke at a recent Netto Financial Services seminar, where he highlighted the foremost strategic questions organisations should consider. Many of these questions are pertinent when it comes to personal financial planning as well.

China plans to become the largest economy in the world by 2040, but there are still many uncertainties in the world market that could not only derail its ambitions, but allow others to benefit from its expansion.

According to Sunter, the challenge is to create an efficient, world-class working environment that should not be left to chance. This is equally important when structuring a personal financial plan. Some of the issues he covered were:

• Can my business run efficiently in the light of any global changes and the growth of China?
• Is there any certainty about the future?
• What are these uncertainties?
• Am I in control of the factors that will allow my business to grow?
• What is my geographical playing field?
• What are the rules of the game (and can these rules change)?
• What tactics can be used in the game?

The same questions can be used when you are assessing your personal financial plan. With personal financial planning, there are always things we don't know and cannot control, for example investment markets are uncertain; and events such as death or disability may occur.

However, as Sunter says, people who succeed understand uncertainty. Surprises are unpredictable and leaders, whichever field they are in, cannot be blamed. Yet leaders must be held accountable for disasters and mistakes that were foreseeable and even preventable

Retirement and death are inevitable, and financial planners are trained to assist in assessing risks and ensuring that care is exercised in all areas of one's financial plan. By using the questions posed, business leaders will be able to review their business environment and business model to identify threats and challenges.

Sunter says we tend to see the world as we would like it to be, rather than as it is. One of your own observations may be that you have sufficient retirement capital.

The need for an objective financial plan cannot be underestimated. One often ignores conflicts of interest and signs of crisis. This we do at our own peril as the entire world's business environment is changing.

Turning his attention to China, Sunter offers two scenarios:

• A harmonious world
  Globalisation continues and China catches up to the west. China then changes from a cheap factory economy to a sophisticated and world-class economy. Indicative of this is that China is expected to overtake Germany by the end of the year and become the world's third largest economy.
• A polarising world
  Things go wrong for China, due to geopolitical events. These could include an escalation of war in the Middle East, with trade declining as the war against terrorism escalates. If the world becomes this “hostile place”, it may disrupt China's supply lines and countries may wish to hold onto their own natural resources. This will affect China as it has very few natural resources. This may even cause unrest in China as a consequence of a falling market.

Sunter points out that SA has a special relationship with China, because of historical links, natural resources and our leadership in Africa. He says that in the future it will be better to have China as a customer than a direct competitor.

In personal financial planning, it is critical that a “harmonious" balance is struck to ensure that when one's earning years run out, sufficient retirement income is assured.

This question is easily answered by a review of your financial plan. If you need help, contact your team of advisers or visit the Financial Planning Institute of Southern African website to find a financial planner.

Debbie Netto-Jonker, CFP™, is founder of Netto Financial Services and was financial planner of the year in 2001.




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