EDUCATED PEOPLE CAN BE FINANCIALLY ILLITERATE

Most people spend 12 years at school, another few years in tertiary education and 30 to 40 years working in order to generate an income. But they spend precious little time learning how to plan their finances.

This truth was brought home to Paul Leonard, an independent financial planner from Port Elizabeth, soon after he left university at the end of 1990.

Leonard was born and educated in Port Elizabeth and grew up in the Eastern Cape and KwaZulu-Natal. He obtained a Bachelor of Science degree in construction and property development, and was one subject short of obtaining a second degree in quantity surveying from the University of Port Elizabeth.

Now a Certified Financial Planner, Leonard's pet peeve is being referred to as an insurance broker or a salesman. Financial planning involves much more than life assurance. It is but one component of a much bigger picture, he says.

After five years at university, Leonard knew he did not want to be in the property business, but completed his course because he did not want to drop out.

After completing his military training, Leonard went to an interview at a life assurance company to humour a friend and landed a job selling life assurance.

"I was fascinated by the fact that, although I was educated, I really knew nothing about personal finances," he says.

However, Leonard quickly became disillusioned with the life assurance industry, because he realised it was set up to sell policies and not to help people.

In fact, after a year, the life company that Leonard worked for asked him to consider resigning because he had not reached his sales targets, but he stayed on for another two years before leaving the company. During that time, Leonard proposed to a local radio station that it broadcast an educational insert. The station agreed to try it out for a month. The programme worked so well that Leonard's slot on Algoa FM has been running for almost 10 years now.

But for all the financial advice that he dispensed, Leonard found it difficult to earn a living. Clients were resistant to paying for advice because they were used to getting advice for free from insurance salespeople.

Eventually he found a way of getting paid for teaching people how to manage their money by running courses for a financial educational company.

Leonard has been a financial planner for 12 years and has been an independent planner for seven years.

He is married to Carol, a music teacher who is now a full-time mother of the couple's three children aged eight, four and two.

When he is not busy helping people plan and attain their financial goals, Leonard is involved in amateur theatre and singing. As a boy he was a member of the renowned Drakensberg Boys' Choir School for six years, and was the top soloist for two years.

His latest theatrical milestone is to be chosen for the lead male role in the Sound of Music, which will be staged at the Opera House in Port Elizabeth in September.


Approach to financial planning
Leonard says he has a values-based approach to financial planning. The starting point of a financial plan is to understand the values of his clients, whether these values are to spend quality time with their families or to travel the world. Your goals follow on from your values.

"We not only ask what goals clients want to attain, but why these goals are important to them," he says.

He charges R1 700 to draw up a financial plan, although he says this barely covers the costs of obtaining legal and tax advice from experts.

Leonard's company is called Money Talk Financial Planning and he has a staff of eight including one other certified financial planner.

Leonard also helps his clients to identify their "financial personality profile", and this helps him to understand his clients' goals and the way in which they are likely to work towards those goals.

He lists the essential elements of a financial plan as:

• Identifying your values and your purpose in life;

• Setting goals in line with your purpose and values;

• Putting a price tag and a time frame to your goals;

• Assessing where you are today in terms of your finances;

• Working out how to get from your present situation to attain your goals in the time frame that is available to you and understanding that it is likely to involve trade-offs;

• Selecting the appropriate asset allocation required to get you the returns you need to achieve your lifestyle goals and then selecting the most tax-efficient structure from an investment product perspective;

• Assessing your risks (which include death, disability, medical and short-term insurance) and catering for these risks is a key ingredient to the plan;

• Implementing your financial plan; and

• Regularly monitoring your progress.

Common mistake
The most common mistake that clients make is that they don't plan their finances and they don't do so simply because they are "too busy" to get around to it, Leonard says.

He adds that the best advice that he can give to clients is to start investing early. A lot of this is common sense and people often know what they should be doing, but there is a difference between knowing what you should do and actually doing it!

He aspires to honesty and integrity in his profession and believes that these qualities are what separates good financial planners from poor financial planners.

He believes that the biggest problem in the financial services industry is a lack of skill and greed.

It takes knowledge and continuous learning to be a professional financial planner, Leonard says.

Many aspiring advisers are greedy and impatient. In the past, you could earn a lot of money quite quickly by selling a lot of products. But to do things properly, you have to be patient and earn your stripes, he says.