Planning For The People

The FPI is floating a plan to broaden financial inclusion beyond high-income earners


There is a long-held perception that financial planning advice is a professional service that only the high-net- worth individuals and cash-flush corporations can afford.

Rightly or wrongly, this perception is primarily responsible for millions of hard-working, gainfully employed South Africans missing out on a service that can enrich their lives and turn their financial dreams into reality.

Then the vexing question that begs posing is: how can the financial planning profession broaden access to its advisory services to cater to middle-income and low-income workers?

As a professional body operating within the financial sector, the Financial Planning Institute of South Africa (FPI) has looked into the Financial Sector Charter (FSC) for inspiration and guidance in seeking answers to this question.

The introduction of the FSC in 2004 increased the focus on financial inclusion and led to the financial sector doubling up its engagement with lower-income households in order to serve this market segment better. As a result, according to the National Treasury, we have seen a sizeable increase in overall financial inclusion from 55% in 2005 to 85% in 2016, meaning that most adults in South Africa now have some form of financial product from a regulated financial institution.

This rise in access to the financial sector provides a springboard from which to deliver innovative products and services to more people, but this has to be done in a manner that makes commercial sense for financial services providers.

To accelerate the pace of transformation in the financial sector, and by extension financial inclusion, the FSC was revised by the Financial Sector Charter Council (FSCC) between 2014 and 2015 to align it with the amended broad-based black economic empowerment (B-BBEE) Act to deepen the third phase of B-BBEE implementation in South Africa.

In response to the implementation of the revised FSC, the FPI is rolling out the Diversity and Inclusion (D&I) strategy aimed at fast-tracking racial and gender make-up of the financial planning sector on the one hand, and broadening the sector’s tentacles to reach more customers, on the other hand.

As far as broadening access to professional financial planning advisory services goes, the FPI believes this could be achieved through offering services to workers in the form of an employee benefit alongside other perks such as medical aids, car allowances and pension funds. Not only will such a move help companies retain key employees, it will also contribute to improving the financial health of their workforces.

This initiative will complement pro bono work and other philanthropic activities that are being done by FPI members across the length and breadth of our country, whereby ordinary South Africans receive assistance from our members including free financial planning advice.

We will be going to the market to test this “financial inclusion” concept through pilot projects with organisations that are interested in keeping their employees financially healthy by facilitating access to certified financial planners for their staff to help them fulfil their long-term financial goals, whereby their financial status is analysed after which a financial plan is drafted to realise those goals.

Ordinary employees can benefit immensely from the advisory services offered by the FPI members, especially access to expertise in areas such as cash-flow management, estate planning, tax planning, investment planning, asset allocation, risk management and retirement planning.

At first glance, the FPI’s financial inclusion initiative may appear to be designed to derive benefits for employers at workplace level, but it may have wider implications for our economy. For starters, our country has a poor culture of saving, hence we have low savings that are not sufficient to finance the investment required to leapfrog our economic development and growth.

In fact, the Old Mutual Savings and Investment Monitor, launched in July last year, found that savings levels of working South Africans were as low as 15% of their income, while gross rate of savings for the entire population is at 3%. This survey also revealed that 16% of income is allocated to servicing debt while 62% goes to consumption spending.

Results from this survey clearly indicate that we need to encourage as many South Africans as possible to save more and invest more. Having a financial inclusion initiative of the FPI’s nature could partly, albeit not entirely, serve as a panacea to our poor culture of saving. So could a flagship programme like the annual Savings Month in July, which was created to address the challenge.

Pushing up our savings rate will, in turn, make funds available to fund and boost our country’s fixed capital investment, which at 18% to the GDP is low compared with fixed capital investment ratios of fast-growing Asian economies like China and South Korea, which are at 47% and 30% to the GDP respectively.

By saving more and investing more, we can boost our economic growth rates to above 5%, thereby creating jobs, growing our SMME sector, and enabling the government to collect more taxes to fund infrastructure and social spending.

Stephanie Pillay is the Chief Operating Officer of the Financial Planning Institute of Southern Africa.

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This edition

Issue 72