Thanks to legislation now in place, investment and retirement planning offers significant protection to you, the investor, so you’re less likely to be duped by a slick policy salesman out to make a quick buck.
However, it is always advisable to do a bit of homework before selecting a financial planner to help you with your investments.
Ask friends or colleagues for recommendations based on personal experience. Alternatively, you can contact most asset management companies who will be able to refer you to their top advisors, or you you’ll find financial advisors on the Financial Services Board (FSB) website www.fsb.co.za
Once you’ve selected an advisor, arm yourself with questions before your first meeting together.
1. Is he/she registered with the FSB and competent to give financial advicen The FSB protects you and you can turn to them if given inappropriate advice. I would recommend that your advisor has at least obtained the qualification of Certified Financial Planner. By requesting a business card you can also look out for his/her FSB registration number, contact details and qualifications.
2. Does he/she have a vested interest in his/her workn Select, where possible, an independent advisor. They usually run their own businesses, so they’re in it for the long term and need your business to sustain theirs. They also deal with multiple asset management/life companies, and are able to offer you what they believe to be “best of breed” advice.
3. Ask questions about the advice rendered. Ensure you understand everything, and don’t be afraid to ask questions about anything you’re unsure of. Remember that the best solutions are often the simplest ones.
4. Be honest about your current financial situation. By withholding information, you might cause him/her to provide you with incorrect advice.
5. Do a financial needs analysis with your advisor. This sets out your investment objectives and the amount of risk you are happy to take. This provides the mandate for your investments.
6. Be informed of all risks, benefits and limitations of investment products offered. Ensure that you are given the terms and conditions of your investment/insurance products, detailing all of the above, prior to signing any form.
7. Have him/her explain his/her fee and costs to you. Your advisor should detail all costs associated with investment products, since these are different to your advisor’s fee, which is a separate cost. Different investment products have different management fees.
8. Ensure that he/she remains independent. No company can offer you
everything; you might have your insurance portfolio with one company and your investments with another. Ensure your advisor keeps your best interests, and not their commission, at heart.
9. Watch out for churning. If your advisor changes your insurance or investments at every meeting, you should be wary. If the advice rendered is appropriate, you shouldn’t need to disinvest and re-invest continuously. You will, over time, need to align your portfolio, but continuous changing of insurance products etc, is unnecessary.
10. Review and analysis. You should be updated on your affairs at least once a year. Speak to your advisor if your circumstances change so that your financial plan can be updated accordingly. Drop him/ her an e-mail, so he/she is able to record this.
An advisor is not a miracle worker, but through patience, teamwork and communication, your financial affairs will be in good hands with the right person looking after you.
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