Last Updated on 07/01/2025 by Carl-Peter Lehmann
Financial Planning Made Simple: Your 2025 Guide to Financial Freedom. As we step into a new year, the financial landscape in South Africa is evolving faster than ever, bringing with it both exciting opportunities and complex challenges. Whether you’re navigating changing interest rates, volatile markets, or the uncertainties of local and global economies, this guide is designed to simplify the journey and empower you to take control of your finances.
Our mission is to cut through the noise and complexity, delivering clear, actionable insights tailored to your needs. In this guide, you’ll discover how effective financial planning can help you achieve your goals – whether that’s building wealth, securing your retirement, or protecting your family’s future. We’ll also break down the critical differences between financial planners and advisors, demystify the fees and commissions often linked to these services, and provide practical steps to start planning with confidence.
Throughout this guide, we’ll address key topics like retirement savings, offshore investing, and how to structure your financial plan for success in today’s unpredictable world. By the end, you’ll have the knowledge and tools needed to make informed decisions and confidently pave the way for a secure and prosperous future.
Table of Contents
Introduction to Financial Planning
Financial planning is about so much more than numbers, budgets, or investments – it’s about shaping the life you want to live. It takes a holistic approach, helping you manage your finances in a way that aligns with your values, overcomes challenges, and achieves your aspirations, even those that go beyond financial goals.
True financial planning isn’t just about selling financial products – it’s about crafting a strategy tailored to your unique circumstances. It transforms money into a tool that empowers you to live a life of purpose and security. Unlike the traditional, product-centric advice model, genuine financial planning puts your needs, goals, and lifestyle at the center. Financial products, when used, are simply tools to support your broader plan—not the plan itself.
Think of it this way: a real financial planner is like a doctor who prioritizes your overall wellbeing. They provide unbiased, impartial advice, focusing on what’s best for you rather than pushing products for commissions. For South Africans, this approach is especially critical in a financial environment where complex regulations, economic uncertainty, and the many unique challenges we face, require thoughtful and personalized planning. Financial planning gives you the confidence to make informed decisions and the peace of mind that your money is working towards the life you value
8 Eye-Opening Insights About Financial Planning in South Africa
1. Working with Financial Advisors Boosts Returns
A study by Morningstar suggests that behavioral coaching provided by financial advisors can add up to 1.5% to 2% in additional net returns annually by helping clients avoid emotional decisions, such as panic selling during market dips. This insight is especially relevant for South Africans, who face local market volatility and global currency pressures.
2. Retirement Preparedness Remains Low in South Africa
Recent research by 10X Investments reveals that only 6% of South Africans are on track to retire comfortably, highlighting the significant gap between retirement savings and actual needs. Most South Africans underestimate the amount required to sustain their lifestyle in retirement, with many failing to account for inflation and rising medical costs.
3. The Emergency Fund Crisis
According to a report by Old Mutual’s Savings and Investment Monitor (2024), more than 70% of South African households cannot cover an unexpected expense equal to one month’s income. This stark reality emphasizes the importance of building an emergency fund as a critical first step in financial planning.
4. Financial Literacy is Alarmingly Low
A global survey by S&P found that only 42% of South African adults are financially literate, ranking below the global average of 57%. Financial planners play a pivotal role in bridging this knowledge gap, helping individuals make informed and confident financial decisions.
5. The Emotional Impact of Financial Planning
Studies show that individuals who work with financial advisors experience reduced financial stress. According to a survey by Momentum, South Africans who have a financial plan in place report feeling up to 30% more confident about their financial future than those who don’t.
6. Behavioral Coaching Matters
Research by Vanguard highlights that one of the key benefits of working with a financial advisor is overcoming behavioral biases. For example, financial planners help clients avoid emotional decisions like panic selling or chasing high-risk returns. In South Africa, where market fluctuations and global economic shifts are frequent, this guidance can be invaluable.
7. The Tax Efficiency Advantage
Proper financial planning isn’t just about saving and investing; it’s also about keeping more of what you earn. South African tax regulations offer unique opportunities (like maximizing contributions to tax-free savings accounts or retirement funds), yet many individuals fail to take full advantage. A financial planner ensures you’re optimizing these benefits to save more for the future.
8. Gender Gaps in Financial Planning
Research by PwC South Africa reveals that women are 30% less likely to work with financial advisors compared to men, despite often living longer and needing more robust retirement strategies. Tailored financial planning can help close this gap and empower women to achieve financial independence.
The Financial Planning Process: A Roadmap to Financial Security
Understanding the financial planning process is essential to creating a plan that reflects your unique circumstances and goals. Far from being a one-time event, financial planning is an ongoing journey – a partnership between you and your financial planner that evolves as your life does. This process considers all aspects of your life, from your relationship status and family dynamics to the legal and financial complexities of your commitments. Open and honest communication is critical, especially for couples and families, where finances often intersect with shared goals and responsibilities. This guide outlines the key steps in the financial planning process, illustrating how thoughtful planning can empower you to achieve the things that matter most to you.
1. Understanding You and Setting Goals
The foundation of any financial plan is understanding your current situation, values, and goals. This step is not about numbers – it’s about gaining clarity on what truly matters to you. Whether you’re planning for retirement, funding education, or saving for a dream trip, this stage lays the groundwork for a customized plan. In South Africa, unique factors such as fluctuating exchange rates and political uncertainty may also shape your financial goals, making this step especially critical.
2.Cashflow and Balance Sheet Analysis
A critical aspect of financial health, this step goes beyond tracking income and expenses. It involves a thorough understanding of your assets and liabilities, helping to optimize cashflow and improve your balance sheet. By evaluating what you own versus what you owe, a planner can assist in managing debts and growing assets. This process is integral to achieving financial freedom, regardless of your income level, and includes strategies for both increasing savings and making wise investments.
3.Modelling and Scenario Planning
This step involves detailed projections and various scenarios, taking into account your current financial standing and future goals. It’s about preparing for life’s uncertainties and opportunities, such as the impact of taking a sabbatical, starting a business, planning for retirement, or handling unexpected events like job loss or health issues. By considering these potential life changes, the plan becomes a flexible framework that adapts to your evolving circumstances, ensuring that your financial strategy remains aligned with your life’s journey.
4. Developing Your Customised Financial Planning Blueprint
Once the groundwork is laid, your financial planner develops a written plan that’s as unique as your life. This blueprint prioritizes your goals and provides actionable steps to achieve them. In South Africa, this might involve crafting your retirement plan, managing high-interest debt, building an emergency fund, or planning for multi-generational wealth through proper estate planning. Your financial blueprint serves as a roadmap, helping you stay on course toward financial security and growth.
5. Implementing and putting your financial plan to work
A financial plan is only valuable if it’s put into action. This step involves reviewing your current financial products and investments to ensure they align with your strategy. It might mean diversifying your investments, restructuring debt, updating wills, or optimizing tax strategies. Importantly, implementation isn’t always about making changes – sometimes, the best advice is simply to stay the course. In a South African context, this step could also include navigating the best mix of financial products, such as retirement annuities, appropriate risk cover, or offshore investment options.
6. Ongoing Navigation and Optimisation
Life doesn’t stand still, and neither should your financial plan. This final stage involves regular reviews to ensure your plan remains aligned with both your personal goals and broader economic conditions. Whether you’re dealing with life events like marriage, a new job, or retirement, or responding to changes in interest rates or market conditions, continuous engagement with your financial planner ensures your strategy evolves as needed. In South Africa, where economic and market shifts can be significant, this ongoing process is vital to long-term success.
Essential Financial Planning Services for Wealth and Security
1. Cashflow Management: The Cornerstone of Financial Freedom
Achieving financial freedom starts with mastering your cashflow. This means more than just tracking income and expenses – it’s about creating intentional habits that lead to stability and growth. Key strategies include building an emergency fund, reducing high-interest debt, and aligning spending with your priorities. Free cashflow is the foundation for wealth creation, enabling you to save, invest, and plan effectively for the future. For South Africans, where inflation and interest rates can significantly impact finances, cashflow management is an essential first step.
2. Protecting Against Life’s Risks
Life is unpredictable, and financial planning must include measures to safeguard your future. Risk protection involves planning for uncertainties like death, disability, or critical illness, which can have devastating financial consequences. Comprehensive insurance cover is the safety net that protects your loved ones and ensures your financial plan stays on track. Without adequate risk cover, you or your dependents could face significant hardship. In South Africa, with rising healthcare costs and increasing uncertainty, risk protection is non-negotiable.
3. Retirement Planning: Building Independence
Retirement planning is about more than just saving—it’s about ensuring financial independence when you’re no longer earning an income. This involves leveraging retirement products like pension funds, provident funds, and retirement annuities. However, diversification is key. Consider including offshore investments and other growth-oriented strategies to manage risk and provide flexibility. For South Africans, where the rand’s volatility and inflation can erode savings, investing internationally can be a valuable hedge. The earlier you start, the more options you have for a secure retirement.
4. Post-Retirement Planning: Managing Assets Wisely
Transitioning into retirement isn’t the end of financial planning – it’s the beginning of a new chapter. Post-retirement planning shifts the focus from accumulating assets to creating sustainable income streams. Living annuities are a common solution, but they require careful management to ensure funds last throughout your retirement. Adapting investment strategies as your risk tolerance changes over time is crucial. This stage also involves planning for rising medical costs and structuring withdrawals to minimize tax liabilities, ensuring your retirement years remain financially secure.
5. Investment Planning and Portfolio Management: Growing Wealth Strategically
Investment planning is where your money begins to work for you. It involves creating a diversified portfolio that aligns with your goals, risk tolerance, and time horizon. A mix of assets – equities, bonds, property, and even alternative investments – can help you grow wealth while managing risk. For South Africans, balancing domestic and international investments is especially important, as it protects against local market volatility and currency depreciation. Effective portfolio management ensures your investments adapt to market changes while staying aligned with your personal goals, optimizing returns over time.
6. Estate and Legacy Planning: Preserving Your Wealth for Generations
A well-structured estate plan is essential for protecting your wealth and ensuring your wishes are honored. The cornerstone of any estate plan is a valid and up-to-date will, but effective planning goes far beyond that. This process involves navigating complex issues, such as managing global investments and minimizing estate taxes, which can have significant implications for South Africans with assets in multiple jurisdictions.
For larger estates, legacy planning takes on an additional layer of importance. It involves strategies like family trusts, charitable giving, and intergenerational asset management to ensure a smooth transfer of wealth. This is especially critical in South Africa, where the lack of proper planning can lead to family disputes, unnecessary tax burdens, or delays in the estate administration process. By working with financial planners, legal experts, and tax advisors, you can leave a lasting legacy while minimizing financial and legal burdens on your heirs.
7. Tax Planning and Optimization: Keeping More of What You Earn
Tax planning is a critical component of a successful financial strategy. It’s not just about compliance – it’s about ensuring that your financial decisions are tax-efficient, allowing you to grow and preserve your wealth. For South Africans, this includes leveraging tools like Tax-Free Savings Accounts (TFSAs), retirement fund contributions, and small business tax breaks.
A holistic tax strategy often requires collaboration between your financial planner, tax specialist, and legal advisor to align tax considerations with your broader financial goals. Strategies might include optimizing capital gains tax liabilities, structuring investments to maximize tax deductions, or utilizing trusts or company structures to manage wealth more effectively for high-net-worth individuals. By taking a proactive approach to tax planning, you can ensure that taxes enhance, rather than detract from, your overall financial and estate planning objectives.
8. Life Happens and Special Situations: Adapting to Change
Life is full of unexpected events, and your financial plan needs to be flexible enough to adapt. Whether you’re celebrating personal milestones like marriage, welcoming a new child, or changing careers – or facing challenges such as illness, divorce, or global economic disruptions – your financial strategy must evolve alongside your circumstances.
In South Africa, where economic uncertainty and global volatility are common, regular reviews and adjustments are especially important. For example, shifting market conditions or changes in tax laws might require a reassessment of your investment strategy. Similarly, unexpected life events may necessitate updates to your estate plan or risk and insurance coverage. By partnering with a financial planner who understands your evolving goals and the external environment, you can ensure your financial plan remains relevant and effective, no matter what life throws your way.
The Difference between a Financial Planner and Financial Advisor
A Certified Financial Planner (CFP®) undergoes a rigorous certification process, including board exams, extensive training, and adherence to international standards. In South Africa, CFP® professionals are held to high ethical and professional standards, providing clients with holistic financial planning that addresses everything from cashflow management to retirement and estate planning. This comprehensive approach ensures that your financial goals are met with a clear, long-term strategy tailored to your unique circumstances.
On the other hand, the term financial advisor is broader and typically refers to anyone offering financial advice, whether that’s investment guidance, insurance sales, or product recommendations. The qualifications for becoming a financial advisor are less stringent, often requiring only basic exams and certifications. This doesn’t mean all financial advisors lack expertise, but their focus is often more product-centric than the goal-focused, client-centered approach of financial planners.
The real difference often lies in the ethos of the firm they represent. Some firms prioritize profit and sales, encouraging advisors to push specific products or earn commissions, which can compromise the impartiality of their advice. In contrast, financial planners – especially those at independent or fee-based firms – focus on providing unbiased guidance that aligns with your goals, not their bottom line.
When deciding between a financial planner and a financial advisor, understanding their qualifications, professional background, and the culture of their firm can make all the difference. Look for someone who is transparent, prioritizes your goals, and offers advice tailored to your unique circumstances.
Different Types of Financial Planning Fees
Financial planning fees come in different forms, and understanding these structures is crucial for making informed decisions when seeking financial advice. The way you pay for advice can significantly influence the quality of service you receive, the impartiality of the advisor, and whether the fees provide good value for money. In South Africa, financial advisors typically operate within three main fee structures, each with its own advantages and limitations:
1. Commission-Based Fees
This fee structure is common among advisors who sell risk products, such as life insurance, disability cover, or severe illness protection. Advisors earn commissions based on the size of the premiums you pay.
While this approach can work in cases where clients need specific insurance products, there are some downsides. Advisors may focus more on selling products than providing holistic advice. Additionally, some advisors engage in “churning” – replacing your existing policies with new ones solely to generate commissions—which can erode trust and harm your financial plan.
Key Consideration: Be cautious when dealing with commission-based advisors. Always ask if replacing an existing policy is truly in your best interest or just a way to generate commissions for the advisor.
2. Investment-Based ‘Fees’ (Assets Under Management Model)
In this model, fees are tied to your investments. Typically, these include:
Initial Fees: Up to 3% + VAT of your invested capital.
Ongoing Advice Fees: Up to 1% p.a. + VAT of your total portfolio value.
While this model provides a steady income stream for advisors managing large portfolios, the term “fees” can be misleading – it functions more like an ongoing commission. One challenge with this structure is the lack of clear correlation between the fees charged and the quality or amount of service provided. For instance, a client with a R10 million portfolio may pay significantly more in fees than someone with a R5 million portfolio, despite potentially receiving the same level of service.
Key Consideration: If you’re paying a percentage-based fee, ensure you understand exactly what services are included. Ask whether the fees align with the value of advice and ongoing support you’re receiving.
3. Actual Fee Model (Flat, Fixed or Project-Based Fees)
This model is based on the work and services provided, offering transparency and fairness. Fees can be charged:
Hourly Rates: Often starting at R1,000 per hour for experienced CERTIFIED FINANCIAL PLANNERS® in South Africa.
Project-Based: For example, a once-off fee to develop a comprehensive financial plan.
Flat Fees: Charged at regular intervals (e.g., monthly, quarterly or annually) for ongoing financial planning services.
This approach ensures that fees are tied directly to the work performed, not the size of your portfolio or the premiums you pay. It’s especially attractive for clients who want unbiased, holistic advice without worrying about conflicts of interest.
Key Consideration: While the actual fee model often feels more transparent and equitable, costs can vary widely depending on the advisor’s expertise and the scope of the work. Always request a clear fee breakdown upfront to avoid surprises.
Which Fee Model Works Best for You?
In our opinion, the actual fee model (option 3) is the most transparent and fair structure. You pay for the specific work and services you receive, ensuring value for money and eliminating potential conflicts of interest. In contrast, the assets under management model (option 2) can lead to disproportionately high fees for individuals with larger portfolios, without necessarily providing additional services.
When evaluating financial planning fees, ask yourself the following:
1. Are the fees clearly explained and transparent?
2. Do the fees align with the value of advice and services provided?
3. Is the advisor focused on your goals, or are they incentivized to sell products?
By understanding the fee structure and asking the right questions, you can ensure you’re working with a financial professional who prioritizes your best interests and delivers meaningful value.
Should you work with a Financial Planner? 3 Reasons it Could be a Game-Changer
If you’re serious about managing your finances, building wealth, and securing your financial future, working with a financial planner can provide substantial benefits. Even Roger Federer, one of the greatest tennis players of all time, relies on a coach to refine his game. Similarly, a financial planner can help you enhance your financial “game” with expertise, objectivity, and personalized guidance.
In today’s digital age, the DIY approach to financial management is more popular than ever, thanks to the wealth of information available online. While it’s empowering to take charge of your finances, the challenge lies in evaluating the credibility of the advice you find. Social media platforms like YouTube and TikTok are filled with self-proclaimed experts and influencers offering financial opinions – but credentials and experience matter. Just because a high-profile figure shares advice doesn’t mean it’s accurate or aligned with your financial goals.
1.Cut Through the Financial "Noise"
The financial industry is filled with conflicting opinions, whether on market movements, economic forecasts, or the latest investment trends (think cryptocurrencies). This barrage of information is often referred to as “noise,” and attempting to decipher it can be overwhelming. Without a clear strategy, you may find yourself chasing trends or making impulsive decisions that hurt your long-term financial goals.
A financial planner helps cut through the noise by crafting a personalized strategy tailored to your unique needs and objectives. Instead of reacting to the latest headlines or social media buzz, your planner focuses on what matters most: your goals, circumstances, and financial wellbeing.
2. More Than Just a Strategy
The true value of working with a financial planner goes beyond creating a financial plan. They act as a trusted partner, helping you navigate life’s uncertainties and make informed decisions. One of their greatest strengths lies in addressing behavioral biases – the blind spots we all have when it comes to money.
For example:
Loss Aversion: A planner can help you avoid panic selling during market downturns.
Overconfidence: They ensure your investment decisions are grounded in logic, not emotion.
Procrastination: They keep you accountable to your financial goals.
Research conducted by Vanguard estimates that a good financial advisor can add approximately 3% per year in net returns through behavioral coaching, tax efficiency, and portfolio optimization. While exact results may vary, this figure highlights the potential value of professional advice over time.
3. Ongoing Unpredictability of Life in South Africa
For South Africans, where regulatory changes, market fluctuations, inflation, and currency volatility are everyday realities, having a financial planner is particularly valuable. Whether it’s navigating tax-efficient strategies, planning for retirement, or diversifying investments offshore, a planner brings expertise and structure to an often-complex financial landscape.
In South Africa, many individuals also face unique challenges, such as managing cross-border investments, understanding local tax regulations, or planning for multi-generational wealth in a volatile environment. A financial planner can guide you through these complexities while helping you make confident, informed decisions.
Is a Financial Planner Worth It?
The decision to work with a financial planner ultimately depends on your personal preferences, financial situation, and goals. For some, the DIY approach might work, especially in simpler financial scenarios. But for most, having a trusted professional by your side during both prosperous and challenging times is invaluable.
A financial planner isn’t just an advisor – they’re your partner in building wealth, achieving your goals, and securing your financial future. Whether you’re just starting your financial journey or refining a long-term strategy, the right planner can make a meaningful difference.
Conclusion: Financial Planning To Secure Your Future
This article has aimed to equip you with valuable insights into the world of financial planning – a comprehensive guide to understanding its many facets and empowering you to take charge of your financial future. By gaining clarity on how the industry operates, the different types of advice available, and the factors to consider when making financial decisions, you are now better positioned to make informed choices that align with your goals.
At its core, financial planning isn’t just about managing numbers – it’s about crafting a strategy that reflects your unique aspirations, values, and needs. It’s about viewing money as a tool to help you live the life you’ve always envisioned, whether that’s securing your retirement, funding your dream home, or leaving a legacy for future generations.
As you move forward, remember that financial planning is a journey, not a one-time event. Your needs and circumstances will evolve, and so should your plan. Armed with the knowledge from this guide, you’re now better prepared to navigate the complexities of the financial landscape, partner with the right professionals, and confidently work towards the future you deserve.
Carl-Peter Lehmann
Carl-Peter is a Director and Partner at Henceforward, bringing over 20 years of experience in the financial planning and wealth management industry. Having worked across various regions worldwide, he brings a global perspective to his work. Carl-Peter is a graduate of Stellenbosch University, a CERTIFIED FINANCIAL PLANNER® (CFP®), and holds a certification in Discretionary Investment Management. He has dedicated much of his career to assisting clients with complex global balance sheets and offshore investing, helping them navigate international financial markets with confidence and clarity.
