Consult this check list when choosing your financial planner
From being swindled to being Financial Planner of the Year: Hardi Swart shares his tips for choosing the right adviser to secure your family's future
I was motivated to become a financial adviser by two different brokers who misled my family after my father's death. The first broker - who invested almost all our money in two high-yield property syndicates that subsequently failed, instead of recommending a diversified portfolio - taught me that if an investment sounds too good to be true, then it surely is.
And by needlessly signing us up for 10 different endowments in an attempt to win a competition for the most sales in his company, the second broker gave me an invaluable lesson about advisers with conflicts of interest.
Since gaining the Certified Financial Planner (CFP) designation in 2011, I've striven to do the very best for my clients. Being a financial adviser isn't about looking after people's money; it's about looking after people. I see my clients as friends, and I take personal responsibility for their families.
There's been a lot of bad press lately about a high-profile adviser and his conflict of interest that led to his arrest on fraud charges.
My concern is that publicity like this discourages South Africans from seeking financial advice - at a time when the financial planning profession is more important than it's ever been.
For evidence, look no further than the recent Sanlam Benchmark survey, which showed that only 8% of South Africans have saved enough to retire comfortably.
Having an adviser you can trust is key to achieving financial freedom - and the good news is that there are plenty of wonderful advisers out there. The check list below is a good place to start.
• Professional designation: It's highly recommended that you use an adviser who is a CFP professional member in good standing with the Financial Planning Institute of Southern Africa (FPI). This international certification requires candidates to obtain a relevant qualification; pass the CFP professional competency examination; obtain a minimum of three years of relevant experience and to adhere to a strict code of ethics. This is commonly known as the four "E's". Find a CFP near you here.
• Pricing: Excellent advisers do not charge excessive upfront fees and they provide full disclosure of their pricing structure at the first meeting. Fees for advice usually range from 0.25% to 1% of assets under management. If the adviser has in-house investment solutions, be sure to ask about investment management fees.
• Who does what: Is the investment management done in-house or by an external research company? If it's done in-house, be sure to check their track record and expertise. Likewise, find out whether the adviser is affiliated with other specialists - tax practitioners, estate planners - or if this is done in-house.
• Service level agreement: Read the agreement carefully before signing it. It should, among other things, disclose any potential conflicts of interest.
• Reviews: Advisers are legally required to review their clients' financial plan at least once a year, but many do so more often. Also, find out exactly how the review process works. One thorough review is better than three superficial ones.
• Experience: An experienced adviser has years of experience in his/her field and should have a clean track record. If you are dealing with an adviser who is new to the industry, ensure that the correct disclosures are made regarding his/her experience and that the adviser is working under supervision.
While this check list is very useful, these are all actually minimum requirements.
Choosing an adviser is an extremely important and deeply personal decision that should be made with both your head and your heart.
You should always check if the adviser is licensed with the Financial Sector Conduct Authority. If your adviser is a professional member of the FPI, you can check with the FPI whether the adviser/planner is a member in good standing or not.
So, take your time and find someone you can really trust. Not only will you be sharing all your financial details (good and bad) with your adviser, you'll also be entrusting them with your family's future.
A good adviser will be able to explain complex concepts clearly and apply them to your situation. They will take a deep and sincere interest in your whole family, and they will guide you towards decisions that make your family stronger - both financially and emotionally.
Good advisers are financial behavioural coaches. They don't tell you what to do but rather show you how to make better financial decisions.
I see myself as a lifeline and coach to friends, not clients. Their happiness makes all the hard work worthwhile.
• Swart is a director of Autus Private Clients and was recently named Financial Planner of the Year 2019