THE financial industry has become complicated. Does the fault lie with insurance companies, investment houses or agents and brokers who promote their products? Could it be blamed on consumers getting greedy in bull markets and panicking in bear markets?

Warren Buffet, one of the world's investment gurus, said: "I never have the faintest idea what the stock market will do in the next six months, the next year, or the next two."

I believe much of the blame for investors' behaviour can be apportioned to financial commentary in the media. Suggestive words like "plummet", "plunge" and "dive" are used to describe small drops in the market, yet these put fear into investors who don't understand the ebb and flow of markets, or what this means to their investments.

Over the last month I've met many of my nervous investors who believed their portfolios were drastically down. They were amazed when they saw that by having the right asset allocation, some portfolios were actually up and a few only down by 3% to 5%.

Statistics show that over the last year little money went into equities, but rather sought safe havens in money markets.

There have been enormous changes in the industry over the last 20 years, which include:

• Product innovations because of competition in the industry.
• Company takeovers, leaving policyholders and investors unsure of who manages their funds.
• Relaxation of exchange controls, bringing a new group of investment houses vying for SA investor funds.
• The licensing of financial advisers permitting investors to hold them liable where they can prove incorrect, or inappropriate advice has been given.
• More transparency over costs.

What can investors do to ensure their investments are structured correctly?

The starting point is to develop a solid financial plan, putting personal and financial data in order, to ensure long-term goals and objectives are met.

Everyone should identify their own risk tolerance and lifestyle requirements, in order to be financially independent when deciding to cease working or change track.

An updated will, stating your wishes in the event of death, is a high priority in financial planning, and will be necessary to re-evaluate how much your family will need for education, paying off debt and future annual expenses.

What must not be overlooked is the possibility of succumbing to a dread-disease or disability, rendering you temporarily, or permanently incapable of working. You must also take into account what is being saved for retirement.

Your investments need to beat inflation, so you need to have exposure to risk. Risk means the difference between your expected returns and what you actually receive.

Investors dislike seeing their long-term investment values fluctuate and often settle for a lower risk profile, and lower returns, which will have an enormous impact on the value of their investments in the long term.

To highlight this, take R1000 per month invested for 25 years:

• At 6% it will be worth R693000
• At 10% it will be worth R1326000

However, you would need to take some risk to achieve these superior returns.

You don't need to be a financial expert to understand or apply the key principles of sound financial planning.

You need to understand the advantages of taking some risk so you do not become a victim of poor investment decisions, and make sure you see the whole picture.