What is a financial needs analysis?


A financial needs analysis is carried out by a qualified financial planner to ascertain the current state of your finances and your financial needs. It is not an invasion of your privacy but ensures that you are not sold any particular financial product without an overall assessment of your finances. For example, 20 years ago, a salesman would have been able to sell you a life assurance policy without any idea of what your expenses were or how many other life assurance policies you had already. He would walk away with a hefty commission and you would be none the wiser.

Zoom forward 20 years to the present and the financial services industry has changed dramatically. The following factors now have to be taken into account when you consult a financial planner and these are incorporated into your financial needs analysis:

  • Your income and expenses or your budget.
  • Your current assets and liabilities  – this would include assets such as property and liabilities such as your debts.
  • A list of all the current financial products you own such as life assurance policies, funeral policies and investments.
  • Your current and future financial needs depending on your life stage. For example, your marital status and whether you have dependants or not.
  • Your planner or financial adviser will also take into account any employment benefits you enjoy, such as group life assurance and medical aid benefits.
  • Ideally, if you are married, then a financial planner would prefer to consult with you as a couple.

Once he or she has all this information, your financial planner will then look at whether you need to address any financial holes in your plan. For example, you may have married and had two children since you first took out life assurance when you were 25. If this is the case, you will need to calculate what your spouse and children will need to survive financially if you die. That amount then has to be factored into your life insurance requirements.

Other factors that your planner will consider include:

  • Saving for your children’s education
  • How much money you need to save for retirement so that you don’t have to dramatically change your lifestyle when you stop working.
  • Your ability to earn an income is your greatest asset. You need to have income protection assurance so that you are financially covered if you get retrenched or need to resign for a short period of time.
  • Dread disease cover – if you have health issues and end up with, for example, cancer, the medical costs are incredibly high and are often not covered fully by your medical aid.
  • Disability assurance – if you sustain an injury and for example, a rock-climbing accident results in you losing the use of your legs, then disability assurance covers costs such as renovations to your home to accommodate a wheelchair, the cost of a wheelchair and physiotherapy in the long term.

While this may seem like a lot of work, it ultimately protects you from being sold products you don’t need and possibly cannot afford to pay for. It also ensures that your family is financially provided for and that your finances are in order.

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