The value of financial advice, and the changing role of advisers

The first in a series of BDFM Investment Dialogues Live, in partnership with the JSE, held on September 7, focused on the changing role of financial advisers and the growth of exchange traded funds.

Given the variety of investment options on offer, financial advice is more valuable than ever before, said Adèle Hattingh, JSE business development and exchange traded products manager.

 The role of the financial adviser changed in the past 18 months, moving from personal engagement to one that is now largely virtual, said Francis Marais, head of Glacier Research at Sanlam. Some advisers have adapted to this new way of working very well, while others have been less successful. On the positive side, advisers are more accessible to their clients than before.  

 The pandemic revealed the stark reality that the majority of people don’t have sufficient savings to tide them over when their source of income dries up. Similarly, very few people reaching retirement can afford to retire. Covid has changed the way many people view their savings and investments, said Anelisa Balfour, portfolio manager at Old Mutual Investment Group, adding that there remains a significant need for financial advice.

While uncertainty has always been part of investing, increased uncertainty about personal circumstances has never been higher, said Nerina Visser, director and co-owner of etfSA. The challenge for financial advisers in the last 18 months has been to help their clients navigate what are often inflexible investment products as their investment requirements have changed.

 The panel agreed that advisers need to become more like coaches, in helping their clients formulate and stick to an investment plan and strategy.

This is an exciting time for the exchange traded fund (ETF) industry, said Hattingh. Globally, ETFs received a combined inflow of more than $600bn in the first half of 2021 alone, which is more than double the same period in 2020. The local ETF industry, which turned 21 years old this year, has also seen impressive growth in recent years.

ETFs, which originally were designed to provide easy access to an index tracking investment, have grown in prominence and popularity, said Visser. Their biggest benefit is that they provide access to other asset classes such as gold, bonds and listed property, among others.

SA investors can now access a broad and highly diversified base of both local and even global ETFs which allows for global investment diversification. In recent years they have evolved to allow investors to select funds based on different styles of investing such as dividend yield.

 In the future, it would not be impossible to see ETFs represent social impact funds, infrastructure investments and even cryptocurrencies, agreed the panel. Critically, don’t buy an ETF based on its theme or past performance. Instead, understand the underlying investments. 

WATCH the discussion below: