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It was while listening to analyst and author Clem Sunter talk about foxes and hedgehogs - animal types he uses to describe entrepreneurial people versus the typical civil service or corporate salaried employee - that I realised how the animal kingdom could be used to symbolise many aspects of the financial world. Take the common description of someone who prefers not to recognise the realities of a particular situation as an ostrich with its head in the ground. The irony of this behaviour is that a quick reaction to a glaring problem or danger increases the chances of avoiding or overcoming the problem. It's a bit like putting off a medical check-up when you know that something is seriously wrong.

Of course nowadays, a standard medical is basically a blood test, some other simple tests and an ECG. These are tools that the doctor uses to identify potential problems.

In financial planning the diagnostic tool is known as an FNA - a financial needs analysis.

The other day I offered to do an FNA for an "ostrich", I mean client. The client seemed terrified, as if he expected the FNA had something to do with a large needle!

The financial needs analysis is the x-ray or ECG of personal financial planning. The client specifies his/her income requirement at retirement or in the event of death or disability. A computer model then calculates the amount of capital required to generate the income. The model assumes a rate of return on investments and the rate of inflation and takes all your assets and liabilities into account.

The capital amount calculated is then compared to your current provision. If your capital is less than the amount calculated above then you have a shortfall.

My advice is don't be an ostrich. Financial needs analysis is a painless exercise in determining your current position at retirement and your family's position in the advent of your death/disability. Don't wait until it's too late to do something about the problem. Speak to an independent certified financial planner.

Mark Williams (MComm) is a wealth manager based in Somerset West. He can be contacted on (021) 851-3746, 082 960 5926 or mark@synfin.co.za.

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