The need for financial planning in a changing world

These and other questions recur regardless of the economic cycle and macroeconomic variables. Faced with this complexity, professionals in the sector are needed to help savers to have clear objectives.
Enrique Roca

Former Fund Manager and RankiaPro Collaborator

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While I was thinking about the purpose of this article, the South African variant of the Covid has appeared, causing large falls in stock markets and oil prices. The peak of inflation has passed.
What can we do to supplement pensions in a world where the replacement rate of the last salary is only going down, and where deposits and commissions are eroding our purchasing power?

How can we convince the millions of savers to make the move to investors, and do non-investing savers think the same way?

These and other questions recur regardless of the economic cycle and macroeconomic variables. Faced with this complexity, professionals in the sector are needed to help savers to have clear objectives, with their priorities, a timeframe for achieving them, financial budgets for different parts and the monitoring of the plan through the measurement and control of financial decisions.

To do this, nothing better than separating savings-investments according to investment and savings objectives, such as:

  • Saving money for emergencies.
  • Not to lower the standard of living.
  • To be able to help children and education.

Can we achieve these objectives without advice, just as a sick person can be cured without going to the doctor and taking medicine?

In the same way that when we build, we first talk to the architect and then to the builder to make the financial plan – the savers must go to the financial educator to be realistic, and committed to themselves.

The regulation of financial advice in different countries is a diverse world, both in terms of tradition and in terms of requirements. The more power banks have, the more obstacles they face, even though there is a direct link between financial education and economic progress.

In an environment with decreasing margins, the need for more advice, with new digital environments, disintermediation is already a reality, and therefore the leading entities are expanding their field of action, (in addition to a sale of possible returns), putting the customer at the centre of their activity.

For this, nothing better than to look at our allies:

  • In the very long term, risk assets have historically significantly outperformed deposits and inflation.
  • You can reduce investment risk by considering a long-term approach, investing in a diversified way and using the expertise of a financial advisor.
  • Investors should earn the same return as the product in which they invest by avoiding selling in stress-test situations.

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The need for financial planning in a changing world