Picture: 123RF/Andriy Popov
Picture: 123RF/Andriy Popov

I had a flashback the other day about working in the financial advice space 25 years ago. Most of the wealthy had their investments spread across a call account at the bank, an investment property and a share portfolio run by a stockbroker.

It's scary to think that people believed their lawyer or accountant was capable of managing their share portfolio for them.

Liberty was a sexy and aspirational brand back then. Most people giving financial advice were tied agents of big life companies. The only independent advisers were former life company agents who held a few life company contracts.

Then there were a few boring academic types starting a thing called the Institute of Life & Pension Advisers (Ilpa). Unknown to everyone at the time, they were quietly starting a revolution.

The industry is a better place now and momentum is building for the consumer to get more than they expected over the next 10 years.

Who is king?

In the past, brokers and financial advisers were essentially representatives of financial services companies, life companies and investment houses. They represented a life company and their job was to sell their company's products to their clients.

The company rewarded the brokers with relatively large upfront commissions and incentivised them with rewards of an overseas trip based on volumes sold.

In this model, the financial services company pays the adviser, which makes the service provider king!

Over the years, however, more of the academic types quietly emerged. They are now associated with an internationally recognised academic and professional designation - the Certified Financial Planner (CFP). They are members of the professional body called the Financial Planning Institute (the old Ilpa) and are bound to abide by a code of ethics.

Today, the emergence of truly independent financial planners and firms continues. They do not represent large service providers; they represent their clients. They give advice first and then, if needed, they implement the advice.

Only then do they turn to the service provider, which gives them a contract to use its products. In this new world, the client and adviser agree on the fee. The client is king, as they pay the adviser and can stop this ongoing payment if they think they are not getting the right service.

Advice is key

Unfortunately, most people in SA have never experienced true financial planning; they have only experienced conversations around investment advice or a product that could help them.

When you offer advice to people over a long period you begin to realise that personal financial planning is far more personal than it is financial. You need to fully understand your clients' needs and develop the most appropriate advice that will help them to meet their financial goals.

Commissions vs fees

In the next year or so, the way in which financial product providers pay advisers is expected to start to change. The current system encourages brokers to move between clients quickly, onto the next transaction. The Retail Distribution Review (RDR) currently being implemented by the Financial Sector Conduct Authority will begin to stop large, upfront commissions that are set by product providers and paid to brokers/advisers on retirement annuity and endowment products.

The move to an ongoing fee paid monthly over a period encourages better behaviour and better outcomes for you. It encourages financial planners to get back to you at least annually to reassess any changes in your circumstances and to reconsider the value of products they are using in your investment portfolios.


The big change has been the advent of regulations on transparency in fees, which started to put downward pressure on fees. Once things are out in the open, people tend to pay more attention to this. It is far from perfect but it has become clearer, and as a result cheaper, to hold the same products.

Independent financial planners no longer represent service providers, unless they own funds themselves. You, as clients, have become the central focus point of independent financial planners.

As a result, you can now sit beside your adviser working out a plan on how best to invest your money and achieve your lifestyle goals. You and your planner can then turn to the industry to see how best to implement your financial plan. This type of relationship seems much better and safer for you. Roll on the next 10 years.

• O'Mahoney is the founder of Veritas Wealth and a former winner of the Financial Planning Institute of Southern Africa's Financial Planner of the Year