Whether you’re getting married, divorced, become a parent, property owner, landed the job of your dreams, starting your dream business or retiring life happens. With these changes, you’ll face varying degrees of financial responsibility. That’s why it’s important to keep tabs on your finances by seeking good, trustworthy financial advice.
Here are BrightRock’s five tips to choosing a financial advisor:
1. Finding a financial adviser
There are many different ways to find a financial adviser. You can approach the person who does the financial planning for your parents or other family members, especially if they’re been trusted with this job for a long time and have a proven track record.
Another approach is to search online for a qualified adviser. There are a number of websites where you can search for an adviser in your area, or you can approach the Financial Planning Institute of South Africa to give you a advisers who are members who specialize in the areas of financial planning that you are looking for advice on.
You could also approach your bank, who often have advisers in branches that can assist their clients with their financial affairs. Or you could contact an insurance company to put you in touch with one of the financial advisers who work for them.
2. What should you check for?
Most important to make sure that you deal with a financial adviser who is a representative of an authorised financial services provider (FSP) and registered with the Financial Sector Conduct Authority (FSCA). This is easy to look up on the FSCA’s website – www.fsca.co.za.
Some financial advisers have studied towards a professional qualification and carry the title of Certified Financial Planners. These CPFs are members of the FPI, and are required to adhere to the FPI’s code of conduct and standard of ethics. It isn’t essential, though, that your financial adviser is a CFP.
Leading into the next point, it’s essential that at your first meeting with the financial adviser that you decide to appoint to do your financial planning, that you establish the different services that they offer. It’s important that the person that you choose can give advice on a number of different types of financial services and that they’ll give you a holistic view of your current financial position, and where you need to get to. Sometimes advisers are specialists in a particular area, for example retirement investments, but might have other advisers in the same firm that can advise of different areas, for example life insurance and short term insurance. Just make sure that you’re getting advice on your whole financial future, not just looking at one thing.
3. What to expect from a financial adviser
At the heart of the financial planning process lies the relationship between the client and the financial planner. A professional financial adviser will follow the six steps of financial planning:
3.1. Establish and define the relationship with the client. They’ll introduce themselves properly and give you confirmation of what financial services they are authorized to advise on.
3.2 Collect the client’s information. He or she would ask you for all the information on your financial affairs such as your current insurance cover, group life cover, details of your investment and their current values. They should also ask you about your future goals and milestones, like at what age you’d like to retire, when your children will finish school or university, and other significant financial goals that might need to be saved for.
3.3 Analyse and assess the client’s financial status. This is where the financial adviser puts all of your information together to see where you are currently – how much you have.
3.4 Develop the financial planning recommendations and present them to the client. Once the adviser knows what you need in future, and has analysed what you have, he or she can develop a plan to get you from where you are now to where you need to be at certain points in the future. The plan could consist of increases to your life insurance cover, increases to your regular contributions to savings, changing portfolios that you might currently be invested in or buying new financial products entirely.
3.5 Implementing the financial planning recommendations. Once he or she has discussed the financial plan with you and you’re happy, they’ll start putting the plan in motion, and making the changes that need to be done.
3.6 Review the client’s situation. This is a critical part of the financial planning process – ensuring on a regular basis that they financial plan is playing out as it should. If there have been deviation, for example if an investment hasn’t delivered the returns that were expected, you might need to move to another fund or investment. A financial adviser should meet with you at least once a year to monitor your financial plan.
4. How much does a good financial planner cost?
There are a number of ways that financial planners make their money – commission or by charging fees, or both. When it comes to commission, it’s quite regulated as to how much a financial adviser can earn on selling a life insurance product or an investment.
Where your adviser charges commission they generally don’t charge you a fee as well, so be careful when you see both. If your adviser just takes commission, you don’t directly pay for their services, but the cost of commission will be built into your premium or contribution.
Remember that your adviser is providing you with a valuable service, so they are entitled to earn commission or fees. It’s only where you feel that you haven’t received a satisfactory service, or where the cost seems very much out of line with the service that you’ve received, that you should question them on it.
5. “Red flags”
The following should make you wary of a particular financial advisor and the services that they offer:
They’re not listed as a representative with an authorized FSP
They tell you that they have been debarred. This means that they have been found guilty of contravening the Financial Advisory and Intermediary Services (FAIS) Act
Relatives or friends have had a bad experience
He or she tries to rush you through the planning process without taking into account your whole financial situation, or fails to analyse your current situation before making a recommendation on a financial product