Planning for the Professional  

Certified Financial Planners are professionals and their own financial planning needs should receive the same attention as their clients. Farzana Botha, Segment Solutions Manager, Sanlam discusses. 

Tony: Your savings is quite an interesting concept; one always wonders how many people understand the difference between savings and investments and just the general thing about savings being a decision that you must make and to stick to et cetera.  

Now, when it comes to financial planning, financial services, and of course investments and savings, clients are quite different. The needs of clients are different from segment to segment, but also from person to person. In the case of professionals or high net worth clients, they would have specific needs. 

So, just as background from a Sanlam perspective, how do you define the professional or a high net worth individual? 

Farzana: From a very technical level, a professional is someone who has an honours degree, so that would be four years of studying or they if they have two, three-year degrees or belong to a professional body. 

The type of occupation that they do causes them to register with a professional body. So, that would be your accountants, lawyers, doctors and even now our financial advisor through CFP. That would be the technical definition in terms of our professionals, those who have studied for a certain period and offer professional service in terms of what they do for a living.  

Tony: How do their needs differ from people that you do not classify as professionals?  

Farzana: For the very reason that you mentioned how people are different in different segments, as well as on an individual basis. If you consider that a person who studied 3, 4, 5 or even six or seven years, like your doctors, they invested a lot in terms of their intellectual capability. They are now offering a very specialized service to the community and to the working world because of this investment and because of what they can offer, they come at a specific price. 

So, their earnings related to their intellectual capacity and their potential to earn is generally bigger or greater and grows rapidly as well. So, with that in mind, when a person is considering their financial position and their financial planning, those variables need to be considered. 

If you have invested in yourself, if your ability to earn an income is greater because of your specialization or your education – most of these people who have the specialized function are self-employed and so their ability to work directly depends on them showing up every day- if you take into consideration that lifestyle, that intellectual ability, their financial planning needs to mirror that and to protect them in those instances where they are unable to show up. Where their minds are impacted due to disability or illness, the financial consequence of that needs to be considered in light of what they do and what they have the potential to do. 

Tony: Now, in terms of the amount involved, because they are professionals and they probably have more stability in their income, they are valuable clients to our industry. Then to a large extent, the fact that they are valuable clients to our industry, it makes it possible for us, just from a social perspective, to be able to deal easier with people who do not have that much money. 

So, therefore, we must incentivize the people with lots of money and stability in their income, to do business with us and to stay with us. In Sanlam’s case, you obviously do the same. I know that you have specifically aimed at professionals, what you call a wealth bonus booster, and that is one of your carrots, to get them in and to get them to stay with you. Can you explain to me what that is all about?  

Farzana: The rationale behind it, is partly what you said, we want to treat them well because they are the big money spenders. There is good value in that, but at the same time, the reason we have the professional offering at Sanlam is to show a very good understanding of the professional client. 

The offering is tailored to that professional client and one of the things that we understand about them is that if they are spending a big premium, and they want to see value for that money that they are spending. Unfortunately, with your risk policies and your retirement continuities, for example, the value is not immediately materialized, even though a lot of money is being spent. 

The wealth bonus and the wealth bonus booster are in place to allow these clients, who are spending these big premiums in order to insure their risks, to be able to unlock some of the value on those premiums being spent. Now, the booster aims to afford professional clients who are spending money on both a risk policy, as well as a retirement annuity, if they happen to have those two qualifying plans with Sanlam, they will then get an additional reward that can be unlocked by that client, in rand value, that they can access and materialize some value. So, that is the rationale behind it, the client can feel like there is some material reward to the money that is being spent towards these policies. 

Tony: You alluded earlier on, that financial planners, CFPs, are included in this, and this has been one of the successes of our industry over the last two decades. The professionalization of the financial planning sector and specifically the advisors in that sector and the CFP and the financial planning Institute played a huge role in achieving that. But there is that saying that a cobbler’s children are the worst shot and financial planners regularly forget about looking after their own financial planning and applying a professional method to that. 

Now you included CFPs in your segment as professionals, what has your experience been with the financial planners in terms of taking up their role as professionals and applying it to themselves?  

Farzana: One of the things that I have experienced, and it is a good platform that we are having this discussion on, is that advisors do not realize that they need to consider themselves as professionals. 

Now, in the earlier part of our discussion, I mentioned the investment that goes into their intellectual ability and then being able to offer professional service and add value in that way. And the advisors managing the professionals’ financial planning, they are offering very specialized services and they are offering a very intellectual kind of service. They often forget that intellectual ability is something that adds value, it is monetized, and they forget to see themselves as a professional. And it is also because outside of Sanlam, they are not necessarily considered professional. So, it is not an immediate thought to think I am a professional, I have these similar consequences, I have a similar situation and I need to take this kind of outlook towards my own finances. So, the first thing is that they have not framed it correctly in their minds. They have not necessarily looked at their finances the same way they would look at their professional clients. 

So, we encourage them to start at home because they do not realize that those same risk assessments that they are doing for their client applies to them in the greatest scheme of things. The other thing is just a matter of neglect, advisors are so busy and there are so many moving parts when they’re managing other people’s finances and doing financial planning and assessments, that they forget to take a moment and say; it’s a new year I should review my situation based on last year’s earnings, my current health status and look at where I need to be at the start of the year so that I can still be the key person in my business and carry on this business and provide the service as well. 

So, they need to do a bit of stock take the same way they do review with their clients.  

Tony: Yes, my own way of doing it, because I also qualified as a CFP many years ago, was to approach another CFP with myself as the client. That took it away from myself and placed it on him and after 20 years, I am still with the same financial planner, and he still looks after me as my professional advisor. 

Farzana: That’s a great thing, Tony, because you are also sharing the risk and the responsibility. So, you have another professional person with skills and insight looking at you and making sure that you cover yourself extensively and your family know they have someone to contact in your absence so that they are taken care of. 

 It is very important that, with peer-to-peer discussion, that the CFP advisors make sure that they connect with other like-minded and skilled advisors to look at their own and use yourself as a case study. Every time you look at yourself and you have a conversation with your peer advisor, the both of you are looking, analysing, and seeing new opportunity that you can then translate into business within your own client base as well. 

Tony: Exactly, a little bit of objective perspective. We all need that. Farzana, thank you so much for your insights it was great chatting to you, and a valuable point is that the cobblers should look after their own kids’ shoes.  

Farzana: Definitely, likes attracts so if you are in a great position, you will definitely attract those professionals to you.