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ADAPTING YOUR ATTITUDE TOWARDS MONEY AS YOU AGE

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By Buhle Langa, financial well-being consultant at Alexander Forbes

 

Much of financial wellbeing begins with the choices that we make on a daily basis, from budgeting, putting money aside for an emergency, curbing unnecessary spending habits, to the contribution rate and investment model you choose for your retirement investment.

Having a financial plan is always the first step you need to take when setting out your goals and how you plan to reach them. Your financial plan will change at different stages of your life – it should not remain linear.

Your needs will look different as you move through various phases of your life: from your early years in your career, to becoming established in your career and when preparing for retirement and after retirement.

 

The younger years

Investors in their 20s will have at least 40 years over which to accumulate their retirement savings and should focus on growth. In this stage of your life, aim to keep your savings invested in the most suitable investment vehicle for you.

Buhle Langa

Look for consistent long-term performance and keep your retirement savings invested between jobs to benefit from compound interest over the long term. A high allocation towards growth assets such as shares and property and the full allowable allocation to the global markets (in terms of legislation) could benefit you greatly.

During this stage of your life you will be focusing on planning for and creating your wealth. The choices you make during this time will be the deciding factor on where you ultimately end up during one of the most vulnerable times of your life, retirement.

 

Middle-age investors 

People in this phase where they are starting to earn and spend more and are most likely attempting to pay off debt. Your investment objective could be more moderately high-risk portfolios to keep your money protected however this is dependent on your risk profile and appetite. Because of higher earnings and possible tax savings, first try to top up your compulsory investments as much as possible before building on discretionary investments.

 

The retirement years

Retired investors want to minimise risk and keep up with inflation. Your main objective would be to choose an appropriate income annuity option (either a life annuity or living annuity) that would best suit your retirement income needs.

One of the best things you can do for your retirement planning goals is taking advantage of compound interest. Consider selecting a healthy contribution rate of a minimum of 13 to 15% of your fund salary and investing in more aggressive investments or portfolios in your younger years. In turn, this should help you reap the rewards of the highest possible returns, compounded over the years leading up to retirement.

Two to five years before retirement, your focus now needs to shift towards protecting your savings that you have accumulated over the years. This also highlights why withdrawing your retirement savings before retirement is seldom a good idea and can be detrimental to your quality of life during your retirement years.

 

Discretionary investing for rainy days

In any life stage, make sure you have enough emergency savings so that any unplanned and urgent expenses do not derail your long-term goals. Being prepared financially makes the world of a difference when you have to deal with the breaking down of a car, a death of a loved one, or even the birth of a child.

With the correct financial planning advice, you can structure your investments and insurance without being caught off guard. A certified financial planner can assist in building your financial wellness by analysing your unique financial situation and offering a holistic approach to finding the appropriate solutions for you.

The perfect financial plan will not only look at making you financially well during your lifetime, but should also look at making sure that your affairs are taken care of even in the event of death.

 

Finance

THREE STEPS TO ENSURE RECOVERY OF COVID LOANS GOES SMOOTHLY

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In the wake of the pandemic, the government acted quickly to provide financial Covid support packages to help struggling businesses. With the economy now recovering, Mike Hampson, CEO at Bishopsgate Financial explores the range of options available for banks to ensure that those loans are repaid.

 

Since the start of the pandemic, businesses have raised over £75bn[1] from banks and financial markets, through interest-free emergency support schemes. But the harsh reality is that not all loans will be honoured as the economy recuperates.

As a result, banking professionals with client relationship management experience and skills in supporting clients to repay loans in a challenging business environment, will be in high demand.

 

Mike Hampson

Setting up training capabilities for client support post-pandemic

Commercial bankers estimate 60% of new coronavirus scheme loans[4] will default or suffer other repayment issues that will drive previously unseen levels of non-performing loans. It’s a tough balancing act and one that demands careful management of the lending transaction lifecycle, from origination through to collection, recovery, and handling bad debts. Banks no doubt already have frameworks in place to manage these elements, but it’s highly important to make customer interactions as easy as possible and ensure their genuine concern for their customers is clear.

Subsequently, hundreds of workers at major banks including HSBC, NatWest and Metro Bank[5] are understood to be receiving training in how to deal with vulnerable customers and “demonstrate empathy” as the first wave of repayments for coronavirus loans fall due. Staff ‘sensitivity[6] training builds on client-support and workout capabilities, such as improving sensitivity to early-warning systems, developing short-term forbearance solutions and loan modifications, and providing guidance on alternative products.

This approach may further avoid the additional pressure on the UK’s mental health crisis as financial institutions prepare to call in loans issued during the pandemic.

HSBC, which now has 400 staff in its debt collection team,[7] said the aim was to ensure staff had a “consistent understanding of vulnerability” and are “aware of the factors that could make an individual vulnerable” when having repayment conversations with customers.

An executive at another bank said its expanded debt collection team was being trained in “empathy, vulnerability and listening skills”. The individual told The Telegraph: “Ultimately, we don’t want to damage the economy by being overly aggressive.”

A peculiarity of a crisis situation is that customers don’t always know what they will need until that need is pressing. Finding that their bank is prepared to help in unexpected ways will go a long way toward reassuring them.

[2] https://www.law360.com/articles/1355897/

[3] https://www.bishopsgate-financial.com/insights/the-change-perspective/the-change-perspective-2021

[4] https://www.grantthornton.co.uk/insights/how-to-manage-upcoming-non-performing-loans/

[5] https://industryslice.com/NewsLetter/8_33

[6] https://www.telegraph.co.uk/global-health/climate-and-people/covid-19-has-amplified-parallel-pandemic-poor-mental-health/

[7] https://www.msn.com/en-gb/money/other/bank-staff-get-sensitivity-training-before-calling-in-covid-debts/ar-BB1fNMte

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Finance

FOUR STEPS TO INTEGRATING INTELLIGENT AUTOMATION IN THE FINANCE DEPARTMENT

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Marieke Saeij, CEO of Visma | Onguard

 

It’s clear that Intelligent Automation (IA) is still very much an emerging technology, with one indication being that is has only been mentioned a handful of times on Twitter since the beginning of 2021. Results from our latest annual FinTech Barometer reveal a mixed picture in terms of awareness, with half of finance professionals having never heard the term before. Whilst this is unsurprising for a technology concept very much in the ‘early adopters’ stage, organisations can stand to gain real benefits from embracing Intelligent Automation now, particular within the finance department. With this in mind, we explore some of these benefits and share a step-by-step best practice to implementing it into business operations.

 

Intelligent Automation ensures a predictable order-to-cash process

Such is the speed of introduction of new technologies that it’s a challenge for businesses to keep pace. As the newest innovation in finance, Intelligent Automation is one that organisations can’t afford to let pass by. It truly takes financial process automation to the next level. In addition to helping maintain a high-quality customer service, it also complements the existing skillset of finance professionals in the industry.

Marieke Saeij

While Robotic Process Automation (RPA) and Big Data are key innovations for the sector, IA can be likened to an additional layer that enhances existing technologies. By combining applications, this layer is capable of independently assessing situations and determining the appropriate process sequence. It can, for example, fully determine the risk of a specific customer, and can also predict at an early stage which invoices will be paid late, or even not at all, ensuring that finance professionals can then plan accordingly. The result is a reliable and predictable order-to-cash process.

 

The four steps to an IA-proof organisation

While the benefits of IA are numerous, implementing the technology can prove complex, although some are already treading the IA path without knowing it. In this instance it’s crucial to become aware and begin the purposeful process to full integration. Below are the four key steps to becoming fully IA-proof.

  1. Exploring the potential: Brainstorm where automation can be applied

Step one is to examine the extent to which automation can help your organisation. Blue sky thinking is the key here. What is the ideal relationship with the customer? What does the ideal order-to-cash process look like? In this phase, involving multiple departments from within the organisation is key, from management to operations. The finance professionals who have the most contact with customers are likely to have the strongest knowledge of which processes they would like to see automated. With no limits to ideas, it’s best to explore all the opportunities in the entire order-to-cash process and describe broadly the potential value to the organisation.

 

  1. Decipher which data and technology is needed

The second step is to map out which data and technology is required. Working with a specialist, either external or from the internal IT department, is beneficial at this stage to see where the opportunities lie. In many cases, off-the-shelf solutions are already readily available to help make the difference, so it pays to do the research and gain advice where possible.

 

  1. Firm up the strategy

With the plan mapped out, it’s time to fit the pieces of the puzzle together. Which technology and accompanying software is proving most valuable? It’s vital at this stage to analyse the results the organisation is achieving from deploying the right technology and software. It’s also important to outline any limitations and emphasising the potential risk of failure. This is the business case and the basis for the elevator pitch that will be presented to internal stakeholders.

 

  1. Draw up the roadmap and start benefitting from agility

The fourth and final step is prioritisation. The roadmap will describe step-by-step how to move from the undesired current situation to the desired end goal. In the first step, choosing a subproject that is relatively easy to achieve will help gain support from other departments within the business, and provide invaluable experience that can be applied to the more complex components that follow later. This agile approach facilitates a learn-by-doing mindset and allows the following steps to be tackled in a smarter and simpler way.

 

Effective preparation is half the battle

Exploring the potential of automation, mapping the required data and technology, establishing the strategy and laying out the roadmap are the four crucial steps to ensure the foundation for Intelligent Automation. Effective preparation and estimating which technology and accompanying software is needed will help to create a streamlined and error-free order-to-cash process. To ultimately save time and costs, empower finance professionals and maintain customer loyalty, the time for Intelligent Automation is now.

 

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