QUESTIONS TO ASK A FINANCIAL ADVISER

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Ashley Percival, CFP®

Whether you want to plan for retirement, secure your children’s education, or you simply do not have the time or expertise to get your finances in order, working with a financial adviser can be a helpful step in securing your financial future.

Because financial decisions have such a huge impact on our lives, it is vital to obtain the services of the right financial adviser. Find someone you’re not only comfortable working with, but trust.[i] Someone who has your best interests at heart, the necessary experience to address your needs and with whom you can build a long-term relationship.Trouble Shooting

 

How do you find the right financial adviser?

Asking the following questions will significantly improve your chances of finding the right financial adviser:

1. What services do you offer?

A financial adviser should list all services offered such as wealth planning, insurance services, tax planning, estate planning etc. A ‘one-stop shop’ offering all types of financial services is convenient. However, there are instances when using a specialist is preferred. For example, if you want to invest a significant amount of money, you might be better off to approach a financial adviser specialising predominantly in wealth management services.

Apart from services offered, it is also important to know whether the adviser is independent or a tied agent. Unlike tied agents, independent advisers are not linked to a specific product supplier and can offer unrestricted advice and solutions from different product suppliers.

 

2. What are your qualifications, certifications and/or credentials?

Being well-educated generally indicates that the adviser takes his work and profession seriously. Especially when the adviser’s qualification is related to financial planning.

A designation that is highly regarded in the financial services industry is the CFP® designation (CERTIFIED FINANCIAL PLANNER®). The CFP® designation is internationally recognised as the benchmark for professional advice. Holders of this designation have met stringent qualification and competency requirements as well as abide by unequivocal ethical standards. This means that not only will you have peace of mind regarding the technical accuracy of the advice but also the integrity that underpins it.[ii]

Financial advisers are obliged to disclose the financial products they are licensed to market. This information can be accessed on the FSB’s website at https://www.fsb.co.za/departments/fais/searches/pages/providers.aspx. It goes without saying that you should not do business with an unlicensed ‘financial adviser’.

 

3. What is your experience?

The adviser should tell you about his/her financial services related experience, which should include his/her length of service in the industry and companies he/she worked for.

The adviser should also tell you about his/her clients. This will assist you in judging whether the adviser has the requisite experience in dealing with people with similar issues and goals as you. By identifying an ideal client profile, both you and your adviser can determine if there is a mutual fit before working together.

 

4. Can you provide references?

There is a reason why prospective employers ask for references when deciding to employ someone. Regrettably, clients rarely ask financial advisers to provide references.

Talking to an adviser’s existing clients gives you an opportunity to ask questions about their experience from a client’s point of view. If an adviser is reluctant or refuse to give you names of references he/she may not be worth keeping on your short list.

 

5. How are you remunerated?

The importance of this question cannot be overstated.[iii] Advisers should be 100% transparent when it comes to explaining their fee structure so clients fully understand how they are paid.

The different remuneration structures include:

Commission – Upfront commission and ongoing commission typically paid on ‘old style’ investment policies and life insurance policies. At GlenFin™ we steer away from investment products that pay commission. These products are generally expensive and penalise clients should they decide to disinvest or transfer their investments.

Fee only –  Fees can be charged by hourly rate, per job, agreed retainer or a percentage of assets invested. A fee regime should minimise tendency towards biased recommendations. A fee only adviser does not receive transaction-based commissions, but is paid for initial and ongoing advice given.

Fee and Commission – This is a combination of both the above.

 

6. What level of service can I expect from you?

You should discuss this with the adviser upfront. Ask questions like: How often will we meet to review my financial plan? How will you update me on the performance of my investments? How quickly will my phone calls and e-mails be returned? Will they be returned by you or by support staff?

Remember, you pay for advisory services and should not expect anything less than a professional level of service from your financial adviser

 

7. How will you help me to reach my goals?

The adviser should tell you how he/she will assist you to reach your financial goals. An adviser will do this by asking about your financial goals and investment objectives. Are you mainly looking for safety, income or long-term growth? Are you saving for something specific, like retirement?

The adviser will also ask about your financial situation, investment knowledge, risk tolerance etc. This information may seem personal, but it assists the adviser to make the best recommendations for you.

 

8. Are you insured?

Financial advisers in South Africa must carry professional indemnity cover and where they deal with client funds they must have fidelity insurance cover as well. Advisers are obliged to disclose this information without it being requested.

Make sure that the financial adviser not only has the appropriate risk policy(s) in place, but also that cover provided is sufficient.[iv] It will give you some level of protection against the risk of suffering losses as a result of inappropriate advice.

 

9. Succession planning

You want to know that you will be looked after if something happens to the financial adviser. Your adviser should tell you whether he/she has a succession solution in place should something unexpectedly happens.

The professional level of service expected should not change, and the same group of experts should continue to serve you to address your financial planning needs.

 

To conclude

Do your homework and take your time when selecting a financial adviser. It may be uncomfortable to challenge an adviser with questions, but in the long run, you’ll be glad you did your research.

Gone are the days of paying fees without receiving anything in return. If your adviser cannot demonstrate value beyond doubt, then you deserve to find an adviser who can.

[i] https://www.ft.com/content/e1a93f94-52ea-11e4-9221-00144feab7de

[ii] See https://glenfinadvice.co.za/2017/01/08/why-work-with-a-certified-financial-planner/

[iii] See my blog https://glenfinadvice.co.za/2016/08/08/why-fees-matter/

[iv] http://today.moneyweb.co.za/article?id=463793#.WHIv_JLavIU

 

 

 

 

 

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