South Africans need better access to good, unfettered financial advice. But who is going to pay for this?
Recently I was reminded of a story of a man I had once interviewed. Twelve years ago he was severely injured in a work accident and as a result he is permanently disabled. His company had insurance which now pays him 75% of his salary for the rest of his life.
This may sound like enough compensation, however the reality is quite different. Firstly they discontinued his medical aid which now has to come out of his own pocket. Secondly because they only provided a monthly income he had no lump sum to assist him in adjusting to his new life which required modifications to his home. He has no money to leave his children and his wife left him as he could not cope with his disability.
His life has fallen apart and he is now trying to find a way to improve the payout he received so he can at least leave something to his children as his current annuity dies with him. Unfortunately with so much time passing it is virtually impossible. The life company argues that they simply paid out the insurance that his employer had in place and that no further action is required on their part. The employer feels that their duty has been fulfilled by having the insurance in place and his union, despite him being a former shop steward, offered no support or advice at the time.
This raises the very important issue of advice. This man needed good advice at the time of the injury. He was in hospital, disorientated and emotionally broken by the news that he would never walk again, he was in no condition to make an informed decision or to fight for his rights.
The question is who should have provided that advice? Should his employer have paid for a financial adviser? Should the life company have included financial advice as part of the fee they make from selling the product to the employer? Should the union have provided advice and legal representation?
These are very important questions as we start debating the financial state of South Africa’s households. We need to improve the levels of financial literacy in the country and we need to give more people access to good, unfettered advice. But who is going to pay for this?
Currently we have a model where a financial adviser is paid by the consumer via commissions on the product. But what if the solution is to pay off debt and not to buy a product, would you be prepared to pay a fee?
Is it the role of employers and the financial industry? Some people believe that companies should provide advice as part of their wellness programme and the costs should be tax deductible. Others argue that financial providers make significant amount of money through running company pension funds and risk cover and that this should include financial advice. Then there are the unions who have built up significant pension fund assets who could also be a source of advice.
Please post a comment and tell me: where do you go for advice and who do you believe should be providing advice? Do you believe that you would make better financial decisions and be in a better financial position if you had someone to advise you?