Connect with us

Finance

FINANCIAL MYTHS AND FALSE BELIEFS

Published

on

By Rita Cool, certified financial planner at Alexander Forbes

 

Throughout life you will come across financial ideas that you assume must be correct because everyone is doing it. You might believe that unless you follow suit, you are not successful.

By doing this, your brain is taking a shortcut in deciding by assuming that everyone else who is doing these things has done the research, checking the benefits and negatives. However, it might not be the best solution for you. For example, people may buy or sell shares because everyone else is doing it, not necessarily because it is a good or a bad share.

 

Here are financial beliefs that might not be right for you:

Myth 1: Property is always a great investment

Why property is seen as a good investment …

Property gives you an asset that can increase in value and could also give rental income in certain cases. It can be financed at a reasonable interest rate over a long term, which is classified as “good debt” as you will have a large asset when the debt is paid off.

… but you could also lose money when owning property

You always hope that the value of your property will increase over time and that you can sell the property for a profit. Unfortunately, this does not always happen if the area becomes less desirable over time, or if you have put too much money in the investment.

Have you considered the risks of renting out a property?

There is a difference between buying a house for yourself to live in and buying additional properties to rent out for investment purposes.

Possible risks:

  • You are not guaranteed to get a good tenant or any tenants at all during periods.
  • If your tenants don’t pay the rent, there will be costly legal fees to evict them.
  • Tenants might also damage the property, which will cost money to fix.

Investing in property shares instead of physical property

Rita Cool

Once you have bought your primary house it might be easier to invest in property shares instead of physical property. This can reduce some of the risk and effort involved in managing an additional property. Do your homework before you choose to invest in property and don’t just do it because everyone is doing it.

 

Myth 2: You have to own a house

Does it help to downsize property at retirement?

Buying a house gives you security and you can calculate whether a bond repayment is cheaper than a rental.

 

Consider:

  • A house locks in a large amount of your money, which could be used to provide an income and pay for the rent if you need it.
  • Your new property probably costs you the same or more than your older, bigger property and there are additional transfer costs and legal fees.
  • If you own the property, you also still have maintenance and you might want to delegate that as you get older.
  • Will this property be your last property or is it an interim destination before you move into a retirement complex with frail care?
  • If you are not going straight to a retirement complex, you will not necessarily benefit from the property appreciation and potentially only your beneficiaries will realise the benefit.

 

Why not consider renting after retirement?

Not only does it transfer the burden of maintenance to the owner of the property but you can also move into a furnished property and move where and whenever you want to. Perhaps while you are a younger retiree you would like to see the world for a while and then move into a retirement complex or in with family when you are older. As a retiree, you can structure your retirement, such as where you want to stay, however you want to.  If you are considering moving to a different province or country after retirement, it would be wise to rent for a while until you have looked at the areas that you would like to live in.

 

Myth 3: You have to own a car

Contrary to popular belief a car is not an asset but an expense. Not only do you have the cost of buying or paying off the premium monthly, including interest, but you need to pay for fuel, insurance, annual registration fees and maintenance. While a car is convenient to have, is it really necessary to own one?

When you think about buying a car take into account all the costs to see if you can afford it. If you can only afford the premium and petrol, what happens if you have an accident and you can’t fix the car? Compare the costs per kilometre for the different types of ownership and price points compared to alternatives like ride sharing or ride hailing solutions. Can you consider renting a vehicle for longer trips?

 

Myth 4: You must buy a new car for retirement

As you get closer to retirement you might feel that you need to buy a new car for retirement that you can pay off before you retire, or buy a new car at retirement. Do your calculations carefully for these options:

  • Can you continue to drive your existing car for a few more years and save the premiums until you really need it?
  • Can you afford to lock in a large portion of your money at retirement in a car or is it more important to pay monthly expenses like food and electricity?
  • Can you redirect the money you wanted to spend on financing a car to saving for retirement?

If you do need a car after retirement, you have put away the money and can afford to buy the car for cash instead of financing it or giving up some of your retirement savings.

 

Myth 5: You have to save or invest

Saving in itself is not a myth, but when and where you save is important. Before you invest you need to save and before you invest you need to look at your debt. Don’t invest if you have a lot of expensive debt that is costing you much more in interest than the return you can get on an investment. Once your debts are under control you can consider investing in your retirement funds, unit trusts or a tax-free savings account. You still need a safety net for an emergency but once you have that, see if you can clear your debt with every available rand you have. By clearing your credit card you also create a further safety net for emergencies.

 

Myth 6: Be loyal to a service provider that you have been with for a long time

Although it is not a good idea to chop and change products and providers, you don’t have to stay in a product or use a service provider who no longer benefits you. It could be that your service provider is not the cheapest or most efficient or up to date with benefits. Or you feel an obligation towards a person who has given you service for a long time but can’t offer you the best solution for your current needs. Unless your products work for you and give you the best value (note, which is not necessarily the cheapest product), consider another option that benefits your situation. You might be losing out by not reassessing your financial structures, be it investments, banking products or insurance.

 

Finance

THREE STEPS TO ENSURE RECOVERY OF COVID LOANS GOES SMOOTHLY

Published

on

By

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

Continue Reading

Finance

FOUR STEPS TO INTEGRATING INTELLIGENT AUTOMATION IN THE FINANCE DEPARTMENT

Published

on

By

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.

 

Continue Reading

Magazine

Trending

Business1 day ago

HOW TO ENHANCE THE CUSTOMER EXPERIENCE IN YOUR RETAIL STORE

Do you own your own retail store? Are you hoping that 2021 is the year you are able to grow...

Finance1 day ago

THREE STEPS TO ENSURE RECOVERY OF COVID LOANS GOES SMOOTHLY

In the wake of the pandemic, the government acted quickly to provide financial Covid support packages to help struggling businesses....

News1 day ago

SALESFORCE EXPANDS ITS FINANCIAL SERVICES OFFERINGS WITH NEW PRODUCTS FOR CORPORATE AND INVESTMENT BANKING

Tailored tools integrated into Financial Services Cloud support the industry’s transition to digital-first, helping deals get done from anywhere New...

Finance1 day ago

FOUR STEPS TO INTEGRATING INTELLIGENT AUTOMATION IN THE FINANCE DEPARTMENT

Marieke Saeij, CEO of Visma | Onguard   It’s clear that Intelligent Automation (IA) is still very much an emerging...

Technology1 day ago

READING BETWEEN THE BUZZWORDS: DISCOVERING THE POWER OF INTELLIGENT AUTOMATION?

by Yad Jaura, Product Marketing Manager at Netcall    The nature of automation means that new technologies, ideas and solutions are frequently...

Finance1 day ago

FOR THE FINANCIAL SERVICES INDUSTRY TO THRIVE POST-COVID-19, AUTOMATION WILL BE KEY

By Anubhav Mehotra, VP and Head of Infrastructure and Cloud Services for Financial Services at HCL Technologies   The economic...

News1 day ago

CROWN AGENTS BANK ACCELERATES INNOVATION AND GROWTH PLANS WITH THE APPOINTMENT OF HEAD OF FINTECH AND CHIEF COMMERCIAL OFFICER

Industry leaders David Mountain and Joe Hurley appointed to Crown Agents Bank’s Executive Committee The new hires will drive forward...

Finance2 days ago

WHAT IS THE MOST IMPORTANT TECHNOLOGY TREND FOR 2021?

While our world seems to be undergoing lots of economic uncertainty, the world of decentralization is blossoming. And this does...

Finance3 days ago

A BRIEF GUIDE TO TRADING IN CRYPTOCURRENCY SECURELY

Trading in cryptocurrency is becoming increasingly popular in the financial world. Crypto’s huge rises in value over recent months has...

News3 days ago

CHECKMARX APPOINTS ROMAN TUMA AS CHIEF REVENUE OFFICER

Veteran security leader to oversee Checkmarx’s go-to-market strategy and drive demand for developer-centric AST solutions   Checkmarx, the global leader in developer-centric application...

News3 days ago

CASHFLOWS ANNOUNCES GLOBAL PARTNERSHIPS WITH IMX SOFTWARE AND EDYNAMIX TO OPTIMISE PAYMENTS ACROSS A WIDE RANGE OF INDUSTRIES

Each new partner will integrate Cashflows’ acquiring solutions to expand their payment methods, access data in real time to speed-up...

News3 days ago

LINE AND PT BANK KEB HANA INDONESIA LAUNCH LINE BANK IN INDONESIA

The launch of LINE Bank in Indonesia signals a significant expansion in LINE’s fintech business, following the successful launch of...

Business3 days ago

A GLOBAL ESG STANDARD IS ON THE HORIZON. IS UK INDUSTRY READY?

Richard Wall is the Founder and CEO of Emex, which provides ESG and EHS software solutions to businesses    Fifteen...

Finance3 days ago

2021: THE YEAR THE FINANCIAL SERVICES SECTOR WILL ENTER THE ERA OF BOUNDLESS CUSTOMER ENGAGEMENT

Steve Bell, VP EMEA Solutions Consulting, Verint Systems   It can feel like businesses lurch from one disruption to another....

Business3 days ago

HOW TO UP YOUR EMAIL MARKETING GAME IN THE FINANCIAL INDUSTRY

Sam Holding, Head of International, SparkPost   The secret to a successful marketing campaign, no matter the industry, comes down...

News5 days ago

ETRADING SOFTWARE’S DIGITAL TOKEN IDENTIFIER FOUNDATION ESTABLISHES TASK FORCE WITH ASSOCIATION OF NATIONAL NUMBERING AGENCIES ON DIGITAL ASSET STANDARDS

To examine synergies between the DTI and ISIN standards   Etrading Software (ETS), global provider of technology-led solutions designed for...

Finance5 days ago

WHY FINANCIAL SERVICES NEED TO ADOPT LEAN AND AGILE PRINCIPLES

By Philip Farah, AVP Head Digital Transformation Services, Global Accounts at World Wide Technology (WWT)   The financial services industry...

Finance5 days ago

HELP YOUR TEENAGER MANAGE MONEY BETTER

By Kerry Sutherland, certified financial planner at Alexander Forbes   Helping your teenager start good money habits now will serve...

Banking1 week ago

BANKS OF THE FUTURE WILL BE ASSEMBLED, NOT BUILT: HOW BANKS CAN EXPAND AND INNOVATE BY RETHINKING THEIR PARTNERSHIPS

Author: Kelly Switt, Senior Director, Financial Services Strategy, Ecosystem and Strategic Partnerships, Red Hat   The financial services business ecosystem...

Top 101 week ago

SKILLING AND METROPOLITAN X PARTNER TO OFFER ADVANCED TRADING EDUCATION PROGRAM

Skilling, a Scandinavian fintech providing online trading on a wide range of world markets, has announced a strategic partnership with...

Trending