“Finding a financial adviser you can trust often feels like a daunting task, with many not even knowing where to begin,” says Lizl Budhram of Old Mutual Personal Finance.
“In the financial services industry, as in any industry, you get good advisers and you get bad advisers. The trick is being able to differentiate between the two,” she adds.
As tough economic conditions are expected to persist in 2018, many South Africans need guidance on how to build financial security and avoid tapping into savings and taking on debt. Despite this need for advice, only 13% of metro, working South Africans currently have a relationship with a financial adviser, according to the 2017 Old Mutual Savings & Investment Monitor.
Budhram says that even if you’re confident and knowledgeable about money, a good financial adviser can add value by helping you keep your financial goals on track and maximise your financial potential. “The lingering perception that financial advisers are a luxury reserved for wealthy folks prevents the majority of South Africans from benefitting from sound financial advice.”
A nationwide study by the Financial Planning Institute of Southern Africa (FPI), shows that 70% of South Africans don’t know who to trust when it comes to financial planning.
“What customers need to take into account when sizing up a potential adviser are their qualifications, their access to reliable financial products and their ability to offer holistic advice.
“As a starting point, I always recommend you ask to see the adviser’s training credentials and FAIS (Financial Advisory and Intermediary Services) accreditation, as well as information on the products and services they are able to provide,” Budhram says.
“An adviser who is part of, or linked to, a reputable financial institution will have access to a range of specialist support services to suit your specific needs – and you’ll have peace of mind that any products they recommend will deliver on the promised benefits.”
Doing some upfront research is also a good idea. “Ask family and friends for personal recommendations or referrals, and conduct online research on the adviser and their business credentials and reputation.”
Budhram points out that a good financial adviser will take the time to understand your personal circumstances, needs and goals before building a plan around these. “This becomes the blueprint for your financial future and should grow and adapt to any changes in your circumstances. This is extremely important as it means your relationship with your adviser should be a long-term journey based on mutual trust.
The comfort factor and being able to relate to your adviser and vice versa is also paramount. “A good adviser understands you and gives you peace of mind that they will look after your best financial interest. The relationship should be grounded in trust and a healthy rapport.”
“At the same time, it’s also important to know that if something were to happen to your adviser, there would be someone else available to take over the relationship,” Budhram adds.
Possibly the most important quality to look for is a responsible approach to financial planning. “Unfortunately, some financial advisers function only as salespeople, in order to maximise their commission. Typically, this type of unprofessional adviser is only interested in extracting information that will be useful in identifying products they can sell to you.
“Thankfully, the Retail Distribution Review (RDR) proposals involve a fee-based structure, which means customers will be able to choose to pay advisory fees for advisory services instead of only commissions on financial products. This ties in well with the ethos of lifestyle financial planning, which is something we at Old Mutual believe should influence everything from the processes within the financial advisory practice to the way an adviser engages with different customers.”
Lifestyle planning, Budhram explains, is about finding out and articulating a customer’s lifestyle goals and needs.
“Ultimately, this approach is the true sign of a good financial adviser, because what you need is a professional who is up to date with industry standards, always has your best interests at heart and offers the highest calibre of advice.”