How to find a good financial adviser

Lindi asks: I want to start planning properly for the future, but have heard lots of horror stories about people being ripped off and misled by financial advisers. How do I find a good financial adviser?

Maya replies: Like any industry there are good and bad people in the financial industry. However, the consequences of a bad financial advice can be detrimental to your financial well-being, so it is worth taking the time to find someone you can trust.

A life coachFirst of all you need to decide what you want from your financial adviser. A financial adviser should not be a product seller. Quite frankly, if all you want to do is invest R500 a month for the next five years you can probably do that by doing a bit of reading and without financial advice.

If, however, you want to put together a proper plan that sets a blueprint for your financial future, then a good financial adviser is invaluable. A financial adviser becomes a life coach in a way in that they help you create the financial plan for your dreams and goals.

Apart from your finances, a financial adviser would want to know all about you:

  • Do you have debt and are you managing it?
  • Do you have children or are you planning on starting a family?
  • Will you be buying a home?
  • Do you have plans to change your career or one day start your own business?
  • How do you see yourself later in life — do you want to travel the world, work for a charity or just enjoy being with your grandchildren?

Where to find an adviserThe best starting place is word of mouth. Speak to friends, family and colleagues. If they have had a good experience that is a good sign. However, if they think their adviser is great because he/she doubled their money in a month or has a “great investment” that is only available to his/her select clients, then be wary. You are looking for someone who is there to partner you on your financial journey, not sell you get-rich-quick schemes (which usually make you poorer).

Check out the Financial Planning Institute (FPI) for a list of professionally certified financial advisers. The FPI is an international organisation and advisers have to qualify to be registered. (www.fpi.co.za).

The Financial Services Board also has a list of all the financial advisers that are accredited with them. This would be a good check list to see if your adviser is registered as required by law. (www.fsb.co.za)

Personally I prefer to work with a financial adviser who charges fees for his/her time rather than commissions on the sale of a product. Unfortunately there are not that many of them in South Africa at this stage; however, this is a growing trend.

The interviewThese are a list of questions to ask before you sign up with an adviser. A very basic starting point is that the financial adviser must be licensed with the FSB.

  • Are you qualified?
    Many advisers are certified financial planners (CFP), but experience can also be a form of qualification. Find out how long they have been in business.
  • Do you have references?
    A referral from a satisfied client is one way to select a good adviser. However, find out first why the client is satisfied. Is it because the adviser doubled their money in a month or because they have a long-term financial strategy that they are happy with? Short-term gains can be reversed, but a long-term financial plan creates long-term wealth.
  • Do you follow the six-step process?
    Most leading financial planners follow the internationally recognised Financial Planner Institutes six-step process for identifying a client’s current financial knowledge and experience, and current financial situation. The gap between the current situation and desired outcome helps to create the financial plan.
  • How often will I meet with you?
    Financial reviews are critical to any successful plan and one should meet with an adviser at least once a year. At this time changes to personal circumstances can be discussed as well as taking stock of whether or not you are on track with your plan.
  • Do you have someone who can step into your shoes?
    It is preferable to deal with a financial adviser who is part of a company, so if something does happen to the adviser there is someone else who can take over the relationship.
  • Which companies do you deal with?
    Make sure your adviser has contracts with reputable service and product providers. Many top financial services providers provide advisers with ongoing training as well as access to a team of experts who can assist the adviser on the more technical aspects of financial planning such as estate duty, taxation and trusts.
  • What do you charge and what will you provide for this fee?
    It is important to understand how the adviser earns an income. Some are paid commission by the product providers they represent, and others an advisory fee. You need to understand what services this includes and whether you feel that you are getting value for money. Changes to legislation now allow clients to discontinue their ongoing advisory fee on investment products if they feel their adviser is not providing a service.
  • What are the costs of this product and what is your commission?
    Costs matter, especially on investment products where they can affect total returns. A good adviser will offer you various choices where you can decide on the relative costs and benefits of the products on offer.
  • Why is this product right for me?
    The product must meet your needs, not that of the adviser, so make sure you understand the product benefits, terms and any restrictions on claims or withdrawals.

Read more news, blogs, tips and Q&As in our Smart Money section. Post questions on the site for independent and researched information.

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Maya Fisher French
Guest Author

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