A financial needs analysis is done to determine the current state of your finances and your future financial needs.
A needs analysis ensures that you are not sold any financial product without an overall assessment of your finances and existing financial position.
For example, in the past, a salesperson would have been able to sell you a life insurance policy without assessing your affordability and existing policies. The legislation now requires financial service providers to do an FNA for every client.
The benefit to the client is that after a needs analysis you will have a holistic view of your finances and would be able to make an informed decision.
The following factors must be considered when you consult a financial adviser, and these are included in your FNA:
- Your income and expenses or your budget.
- Your current assets and liabilities – this would include assets such as property and liabilities such as your bond repayments.
- A list of all the current financial products you own such as life insurance policies, funeral policies, and investments.
- Your current and future financial needs.
- Your marital status and whether you have dependents or not.
- Your employment benefits, such as group life assurance, pension fund, and medical aid benefits.
- Your financial goals.
Once have all the above information, we will then be able to provide you with a report with the below information:
• How much you need to save for your children’s education.
• How much money you need to save for retirement.
• How much you can put away in an investment and an emergency fund.
• How much life cover you need. So that your dependents do not have to dramatically change their lifestyle after your death.
• How much disability insurance you need. If you are unable to work, your policy will also replace all or part of your income.
• How much income protection cover you need so that you are financially covered if you are retrenched.
• How much dread disease cover you need – if you have health issues and end up with, for example, a terminal illness.