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Overdue debts in South Africa increased by 14% in 12 months. Added to the high cost of living and economic uncertainty, it’s no surprise that three-quarters of South Africans are feeling financially stressed. Kobus Wentzel, Group Distribution Executive for 1Life Insurance and Clientele, answers the question so many advisers are asking and looks at how they can help clients deal with financial worries.
Are South Africans experiencing severe financial pressure?
Financial stress can arise from a number of sources, including high debt levels, persistent cost of living increases, unexpected expenses and falling incomes, as well as economic uncertainty. Many South Africans are experiencing some or all of these!
For example, overdue debts have increased, according to the Q1 Eighty20 XDS Credit Stress report. The value of overdue debt balances in home loans alone grew 13.5% over one year. The report also showed that despite interest rate reductions, a third of SA’s 27 million credit active consumers are spending a quarter to a third of their net income on servicing debt.
Adding to the pain consumers are feeling is the latest BankServ report, showing that take home pay fell in March and April. Economic growth remains weak and unemployment levels have risen. And although the JSE has spent the year hitting record highs, there is uncertainty around future investment returns.
Financial advisers have experience in helping clients deal with financial difficulties
Many clients experience financial stress over financial decisions. Financial advisers are experienced at dealing with these using their expertise and skills. Advisers will explain products to clients, ensure expectations are realistic and conduct annual reviews to make sure financial plans and products are aligned to client needs. Advisers are also adept at helping clients deal with uncertain times, having recently lived through the COVID-19 pandemic and accompanying financial challenges. The skills learned then are just as useful now, but advisers may also need a few more tools and skills to help with 2025’s myriad of financial stresses.
Helping your clients cope with their financial stress
The first step is to identify and acknowledge the cause of your client’s financial stress and determine the extent to which you can assist. You can then draw up plans and discuss these with clients or refer clients to other financial or healthcare professionals.
Before you begin: be clear on your role
When clients are experiencing severe and lasting financial stress this can lead to anxiety and depression, sleep disorders such as insomnia, substance abuse, relationship difficulties and more. You can help clients deal with their money problems, however, health concerns such as depression need to be dealt with by a medical professional such as a GP or counsellor if they persist. Ensure your client knows that conditions such as depression are serious and require medical care.
Identify the source of financial stress
This may seem obvious to the client, but to make sure the solution is appropriate the full scope and extent of the financial problem needs to be determined. A full analysis of budgets, assets and liabilities, as well as financial products can give a comprehensive picture of a client’s financial position and resources.
Draw up a plan to address the problem and plan for the client’s financial future
This is what advisers are trained for and skilled at. The plan needs to:
- Acknowledge and deal with the immediate problem, such as paying off debts by extending terms of payment or by reducing savings contributions and insurance premiums
- Include long-term financial goals, including saving for retirement which can be resumed when the immediate problems are alleviated
- Reduce the chances of repeat mistakes. Many clients, and many of us, make the same mistakes twice. Have a plan for when the problem is solved so that the client adopts different financial behaviours where necessary!
Top tip: This FPA article explains how you can use challenging money discussions as an opportunity for growth and connection.
Refer clients to specialists if necessary
Advisers will be confronted with situations that require drastic action, including debt counselling and insolvency. Where, for example, a client simply cannot make ends meet, these must be options. You can ensure clients understand this may be their best option and refer them to a debt counsellor or lawyer for further assistance.
Build your clients’ money confidence
Financial advisers provide the hard numbers, such as how much the client can save over time by cutting an expense. Perhaps a more important role is giving clients the tools they need to commit to their decisions by building their money confidence. This will ensure clients don’t second-guess decisions too often and stick to financial plans. Confidence also comes from having a trusted expert on their side, the unique and very human role financial advisers fulfil.
Keep an eye on your bottom line
Always remember that you are a business and need to be financially viable. Helping clients with their financial pressures has many long-term benefits. These include building trust and loyalty, and in many cases keeping income streams from financial products - even if these are reduced in the short term such as when a client reduces cover rather than cancelling policies. However, giving too much time and resources to activities that don’t earn an income or have no prospect of earning future income could put you into financial distress. Neither you nor your clients will benefit from this, so you may need to evaluate how much time you give to each client, especially repeat offenders, or charge an appropriate fee for your services and time.
Proper financial planning helps clients deal with financial stress
Clients with needs-aligned and flexible financial plans, realistic budgets and appropriate financial products have a head start in dealing with financial stress. Financial advisers are best positioned to help clients achieve these and reduce their money concerns.
Read more:
Financial Times: How advisers can save clients from financial stress in 2025
Kitces: Distinguishing financial stress from anxiety and client communication strategies to help
Morningstar: The ABC model: How advisors can help manage client stress
eMoney: Financial advisors help clients cope during times of financial stress