Attractive millennial businesswoman presenting company financial indicators, telling business partner about investment plan, showing document with project positive stats sitting at office desk
Attractive millennial businesswoman presenting company financial indicators, telling business partner about investment plan, showing document with project positive stats sitting at office desk

Common questions financial advisors get asked

By Opinion Time of article published Jun 9, 2021

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Glenda Oosthuizen, wealth manager at GCI Wealth, shares her survey of the questions clients are asking, and provides insight into how to resolve them.

1. What is offshore investing and how much do I need to invest?

As the name implies, offshore investing involves buying an investment outside of South Africa. More and more people are putting a growing proportion of their wealth offshore in order to take advantage of the greater growth opportunities available there and to protect against the declining rand.

One can invest offshore directly by using the R1 million annual allowance given by SARS (up to R10 million can be invested but that requires special clearance from SARS). Most overseas funds have minimum investment thresholds, which might make the indirect route more realistic for most of us. The latter means buying into a so-called feeder fund, based in South Africa, but which buys overseas investments. It would be possible to save regular amounts of say R1 000 a month into a feeder fund to build up offshore exposure over time, whereas to invest directly one would have to save up the minimum amount required.

Costs incurred when using feeder funds are generally lower than when investing directly.

2. I’ve recently inherited some money. What is the best way to invest it?

There’s no correct answer here, of course, but one thing is clear: don’t waste this opportunity to give your investments a real boost through this windfall. The best approach is to consult with your financial advisor in order to understand what your current financial situation is in relation to your financial goals, and invest the money accordingly.

3. My family plans to emigrate. What happens to my retirement investment?

There have recently been some changes to the law in this area, and they came into effect on 1 March 2021. Previously, one had the option of emigrating formally (financial emigration) and could then withdraw the full amount from the retirement fund (after paying the appropriate tax, naturally).

In terms of the new regulations, which affect retirement annuities and provident funds, it’s no longer necessary or possible to emigrate financially. There is now simply a three-year waiting period, after which the full withdrawal can be made, subject to paying the required tax. You have to ensure that you are non-resident in South Africa for tax purposes for the full three-year period.

If you had submitted an application for full withdrawal before 28 February 2021, the new law does not apply to you.

4. I’m almost 40 years old and haven’t planned for retirement yet. What should I do? Am I too late?

It’s never too late to take control of your retirement saving, but each year you put it off makes everything harder. If you haven’t planned for retirement yet, you need to take urgent action as soon as possible, and the first port of call should be a financial advisor to help you understand where you stand, and what will be needed to achieve a financially secure retirement.

Although every case is unique, you will probably find yourself having to take on more risk in order to grow your savings faster and/ or to work for longer. My best advice is to speak to your financial advisor today and get things moving.

PERSONAL FINANCE

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