Bank fees…moving forward!

10 months ago I finally changed my bank account…after almost 19 years at Standard Bank, I finally had enough of their fees and their complete lack of interest in me as a client and I moved to Nedbank – for no other reason than that they offered a very attractive fee structure.

For far too long I had been a “prestige” client of Std Bank – which I finally worked out, meant that I had the “privilege” of paying higher fees and little else – a full R185 per month (or R2220 per year) for a current account. I hardly ever went into the bank, hardly every used a cheque, never went into overdraft and most of my banking was via the internet.

The equivalent offering at Nedbank was R65 per month (R780/year).

So with some sense of dread at the thought of notifying everyone and sorting out the debit orders I finally moved. And it was pretty painless…and over the past 10 months I have now saved myself R1200 in bank fees!

Of course bank fees increase every year and the Nedbank fee has now increased to R69 per month (6% increase)…this is completely acceptable (in the current inflation environment,  my opinion). At the same time, Standard Bank’s fees have increased to R199/month (7.5%).

Yes, there are a few differences in internet banking that have taken some time to get used to and I still think that Nedbank’s internet offering is the worst in SA but with a saving of R1560 per year, I can put up with that.

So if you are stuck in the fee “headlights” where you know that you really should be making a change but have not yet gotten around to it mostly because of the fear of making the change, just do it! It is not nearly as painful as the banks would have us believe. And if more people voted with their feet, there would be more competition and better pricing. So, in the words of my old bank, I’m “moving forward”!

2010 – what lies ahead?

2010, it’s finally here…

In just over 1 months time it is the end of the 2010 tax year and there are 2 important deadlines that go with this. They are:

Retirement annuities:

  • RA contributions need to be made before the end of Feb. This year the 28th is on a Sunday so all contributions will have to be done by the close of business on the 26th Feb in order to qualify for the annuity_250x2512010 tax year. But dont leave it to the last minute – get your contribution in way before that – leaving it to the last minute always creates additional and unnecessary stress.
  • If you are unsure about how much you can contribute, speak to your financial planner and most important of all, make sure you are using a unit trust RA. You can get into many of them at no initial fees and you are also not contractually bound in any way (this means you can make changes to the contributions without ever incurring a penalty).


    Provisional tax:

    • This needs to be in by the 26th Feb as well…and this year SARS are applying “new” rules with respect to how the tax liabiity is calculated. Previously you could make a payment in Feb and top this up by the end of Sept…this year, however, you need to have paid 90% of your total tax liability by the end of Feb (you can still top up in Sept). Failure to pay 90% will result in heavy penalties…
    • If you need to pay provisional tax, make sure it is in on time and even if you have a nil return, make sure that you submit the form as well.


    Weeds are green too…

    2009, what a year! Markets have done what they always do – surprised us in the short term. We have seen the JSE ALSI run from just over 17500 in March to just under 28000 at the end of December. That’s more than 54% up since March when everyone thought we were facing the worst financial crisis since the Great Depression. (And offshore market recoveries have been even more spectacular.)

    During this time much has been written about the markets phenomenal gains and whether or not these gains are sustainable and one of the “new” expressions that has emerged has been the term “green shoots”, with particular reference to the “green shoots of growth” that commentators and analysts are starting to see…

    I dont understand how this all works and dont understand wher$RVY2XS2e all the growth is going to come from if consumers are cash strapped and not spending money…

    And I cant help but think that with all this talk of “green shoots” has anyone stopped to think that weeds are green too?

    The Financial Planning Profession

    I attended a refresher workshop for CFP® Professionals hosted by the Centre for Financial Planning Law (UOFS) on Friday. This is part of the continuing education that Certified Financial Planners are required to do in order to maintain their CFP® status. 20080930 CFPLogo_Blue&Black - FPA-1

    One of the interesting things from the workshop was to learn that Financial Planning only started as a career in 1969 when 12 people got together to establish the profession in the USA. 4 years later there were 42 graduates through the CFP® programme. SA joined the CFP® board in 1997 when the old Institute of Life and Pensions Advisors (ILPA) were amalgamated into the Financial Planning Institute and the first CFP’s graduated in SA in 1999.

    The FPI is the custodian of the CFP® mark in South Africa and there are about 3500 CFP’s in SA (out of more than 100000 financial “advisors”). Wfpi-logoe are also one of 24 member countries of the Financial Planning Standards Board – the international body that oversees and sets financial planning standards. There are also more than 125000 CFP’s worldwide and Financial Planning is currently the 2nd fastest growing profession (although I’m not sure what puts us into 2nd place).

    So when you engage with a CFP® remember that you are dealing with someone who is part of a global standards body and that all CFP’s need to have and maintain appropriate levels of skills and ethics.

    Inappropriate advice?

    I recently attended a Financial Services Board workshop on the FAIS Act (Financial Advisory and Intermediary Services). FAIS is big on putting consumer interests first and on making sure that consumers get appropriate advice. Despite the legislation there are still many instances of investors getting bad advice and being ripped off – this is partly due to the way that advisors are remunerated and partly due to the fact that the insurance companies continue to offer inferior and inappropriate products (I am referring specifically to the long-term contractual savings policies that are still offered by insurance companies and more specifically, retirement annuities (RA’s) through life insurance companies). It is my opinion that it is time to explore using FAIS legislation to force the industry to change – yes this is contentious and potentially highly explosive…but here goes anyway.

    For me thehandcuffs issue has to do with insurance companies still contractually binding people to long term contracts in this day and age. W e all know that anyone who enters into any contract is bound by the conditions of that contract and if you alter or break the contract there are penalties. This is the case with contractual insurance products such as life insurance RA’s. This is just the way that it is…However, given that the average person will change jobs many times in a working career (some stats say as many as 6 times) there is no way that any client should or could commit to binding themselves to such a contract – it is doomed to fail.

    Consider the following:

    Mrs Client starts working for Company A that has no pension fund and she is sold a life RA (not the better unit trust option). A year or 2 later she leaves the company and goes to Company B and they have a pension fund so she is “forced” to stop the RA because she can no longer afford the premium and there is also no longer any tax incentive to continue paying. As a result of this she will incur a penalty of up to 30% on the value of her funds.

    Or on a slightly different tack, she has an RA through an insurance company and her employer decides to implement a pension scheme with compulsory membership and again she is forced to stop her RA because she cant afford to contribute to both funds. As a result she will lose up to 30% of the value of her RA. These penalties are as per the Statement of Intent (SOI) that was signed between the Minister of Finance and the Life Insurance Industry some years back.

    This is just wrong! And yet insurance companies still insist on selling these products and still insist on penalisinthumbs_downg clients when they break the contract (I am still trying to get statistics from an insurance company as to how many RA contracts actually make it through the entire term but have not been able to get these yet).

    As a result of the penalties that an investor in a life insurance RA is likely to incur, could he/she not make a case for “inappropriate advice” against any advisor who puts him/her into a life RA? Especially when the advisor knows full well that the client is extremely unlikely to be able to stick to the contract for the entire term and as a result will incur penalties of up to 30% each time they need to alter the contract.

    If the life insurance RA was the only option then there may be some leniency that could be applied, but there is a perfectly good (if not superior) alternate product in the form of the unit trust RA where there will never ever be any kind of penalty because there is no contractual obligation to continue paying? And more importantly, the fee structure on them is completely different – there is no accounting for future earnings in today’s income statement.

    Perhaps the time is coming when the FAIS Ombudsman could well find the following case of “inappropriate advice” on his desk…

    “Mr Broker, you put me into a contractual product, knowing full well that I would probably not be able to adhere to the terms of the contract and that at some stage in the future I would have to alter the premium. As a result of that I will incur penalties…and all along you could have put me into a unit trust option where there are never ever any penalties…surely that was inappropriate advice”?

    Perhaps the same approach will be used when the National Savings Scheme is finally introduced and many people who have RA’s will be forced to stop these as they will be obliged to contribute to the NSS and will not be able to afford to do both the RA and the NSS. At this point, anyone in an insurance RA will incur penalties of up to 30%. right-way-wrong-way1My thinking is that either the insurers will be legislatively forced to waive these penalties or else there could well be more than a few cases for “inappropriate advice” on the FAIS Ombudsman’s desk against advisors for putting clients into life RAs when they knew full well that the NSS was coming and that there would be penalties when the contracts were altered, especially when they could have put the client into a non-contractual (unit trust) RA.

    How about it? There must be some good legal minds out there? Could a client make a case of inappropriate advice against an advisor for putting them into a life insurance RA where they have incurred penalties when there was a better product with no penalties (albeit with much lower commission) available?

    It’s for free (yeah right!)

    I recently read an article where the person was writing about how to choose a financial planner/advisor…some of what he said made absolute sense. Such as, asking for references from existing clients and checking that they are in fact registered with the Financial Services Board. But then, I am afraid, he lost all credibility when he suggested that you should “ask the advisoused-car-salesmanr for a free review of your position and some ideas on where you are weak, nothing too specific, he or she does not have to give it all away, but have you ever paid for a test drive, in a car?”

    Well so much for professing to be a financial planner – he just compared himself to a car salesman! Surely there are better comparisons for someone claiming to be a professional?

    I have a friend who has an excellent (in my opinion) definition of the word “free”. He says that free means “positioned to secure good faith to sell you something at a later stage.” Financial planning is not about selling things to people – it should never be for “free”. There are too many big financial services companies and individuals with hidden agendas that are trying to disguise product selling as financial planning.

    There is very seldom anything for “free” – yes, there are times when we might waive the initial consultation fee but rather than comparing himself to a car salesman, would it not be more appropriate to compare himself to a doctor? You make an appointment (with a well qualified person) and you leave with a diagnosis (you might want a 2nd opinion for which you will pay), a prescription and an invoice. You are then free to purchase the medication anywhere you choose. There was nothing for” free” and there was no feeling of “it was for free but I think I’ve just been had!”

    In its raw form, financial planning might never ever even involve products. It is about identifying financial risks – not about disguising the sales process.

    So yes, bfinancial_advisore careful how you choose a financial planner – find out if he/she really is a financial planner or a disguised product salesman. And while there is nothing wrong with selling products and there are in fact some really good salespeople, it is not financial planning! So dont be fooled – there is seldom anything for free!

    Anyone seen the fat lady?

    So fat-lady2it looks like the “fuss” is all over and the equity market is set to run even further…I guess it is at times like these that you need to make sure you are “in for the ride” and not sitting on the sidelines watching it all go by. But it is also important that investors do a little “stock take” (pun intended) and understand/remember the following…afterall, has anyone seen the fat lady sing yet?

    1. Investing takes time – equity markets can be extremely volatile – remember the past year? They can and do move rapidly in the short term (up and down) and so, if you don’t have time, you cant afford to invest into equities solely (diversify).
    2. You cant time the markets – if you moved to cash a while back (after the market fell) and are still sitting there – sorry for you! You have missed  the best part of the rally. You are either in or out – you cant be both and you cant time it right either!
    3. Learn to ignore the noise around you – have a plan (know why you are doing what you are doing) and stick to it. Don’t be swayed by the noise.
    4. Cash is not necessarily a “safe” or “low risk” option – it hardly ever beats inflation over time. And as an investor, inflation is your biggest enemy.
    5. There are probably still some significant risks in the financial system – share prices have run hard in anticipation of earnings…there are plenty of people trying hard to talk the market up but if there are earnings disappointments then expect to see some more down days…
    6. Inflation risk is still on the upside – big time – just imagine what the increase in electricity price increases is going to do to inflation (we are not alone in this – the UK is facing similar problems). Tradtionally high inflation is not good for shares…but it could still be a while before we see any siginificant increases in inflatioA-game-for-the-bulls-and--200809n.

    Bottom line is this – have a plan and stick to it! If necessary find a good financial planner/coach who will guide you through this and coach you to stay the course.

    The Financial Coach™

    A new car

    Been investigating buying a new car. Why? Because the old one is a 13 year old Isuzu double cab KB260 with 206000 km on the clock and it has an 85 litre petrol tank that will do about 650km in town. It’s old and it’s not very fuel efficient. In fact, last month it consumed about R1300’s worth of petrol…and the clutch packed in which cost me a futher R1500 but other than that, it is great, it is paid for and it allows us to get to places most people cant…and I almost got rid of it…

    Because as I read somewhere, “the philosophy of materialism is hinged on discontentment”…and so I started investigating.

    I looked at a 2008 Nissan Grand Levina – a 7 seater with 1500grand levina0km on clock for ±R130000. It seems like a bargain and it will be much more fuel efficient! I even went for a test drive!

    Well thank goodness the average car salesman is so busy that they dont get back to you when they say they will…because this gave me more than a few days to think about the whole transaction.

    At the moment, the bakkie costs me ±R1300 petrol each month and every once in a while there is a mechanical “issue” but at 206000 km I guess that is to be expected.

    Now on to the “new” car. At R130000 it will cost me ±R2640 pm (at 8% interest) for 60 months and on top of that I would still need to pay for petrol and let’s assume that will be R650 (half of the bakkie). The total monthly cost of the new car? ±R3300 – that is R2000 more than I am currently paying each month! Why would I do that?

    So the plan is to keep the bakkie and save the R2000 that I would be spending on the new car. At 8% interest per annum and an inflation linked escalation, I should have about R170000 in 5 years time and I will be able to pay for the new car with cash.

    Now I just need to learn the secret ofsmiley face being content…

    A timely reminder…

    267293-Chinese-fishing-net-Kochi-0A wealthy businessman was horrified to see a fisherman sitting beside his boat, playing with a small child.

    “Why aren’t you out fishing?” asked the businessman.

    “Because I caught enough fish for one day, “replied the fisherman.

    “Why don’t you catch some more?”

    “What would I do with them?”

    “You could earn more money,” said the businessman. “Then with the extra money, you could buy a bigger boat, go into deeper waters, and catch more fish. Then you would make enough money to buy nylon nets. With the nets, you could catch even more fish and make more money. With that money you could own two boats, maybe three boats. Eventually you could have a whole fleet of boats and be rich like me.”

    “Then what would I do?” asked the fisherman.

    “Then,” said the businessman, “you could really enjoy life.”

    The fisherman looked at the businessman quizzically and asked, “What do you think I am doing now?”

    Who regulates the regulators?

    New_PFA_150dpiAccording to the latest report from the Pension Fund Adjudicator, there are currently about 14900 unresolved cases (complaints) that they are still dealing with and this is on top of the 8275 cases that they have resolved this year.

    link_logo_fsbThe Financial Services Board is also struggling with a significant backlog in their case loads and are unable to meet their own turnaround times (especially in the Section 14 transfer department).

    What is clear from these stats is that:

    1. There is a significant number of complaints being received by the PFA (which in turn means there are some serious issues with the way that many retirement funds are being run and probably means there are some more “scandals” on the horizon),
    2. Both the PFA and the FSB are not able to deal with their respective workloads and appear to be significantly under-staffed. As a result, the people that they are there to serve and protect (investors) are being prejudiced.
    3. If you have a complaint about the regulators (FSB or PFA) there is nowhere you can turn.

    So who regulates the regulators…?

    Attempts to contact the FSB today have proved fruitless…the website is down as are their telephone lines.