Qualifications

Just as you would expect your architect to have the proper qualifications, so too should your financial planner. What you are looking for is their financial services provider (FSP) number, which he or she should give to you upfront. You can use the planner’s FSP number and double-check their qualifications on the Financial Sector Conduct Authority website. You can also find qualified financial planners in your area if you do a search on the Financial Planning Institute of Southern Africa’s website.

If it is a legitimate FSP, you should also be able to verify what the planner is qualified to advise you on. As Buntu Bam, a certified financial planner at Alexander Forbes, points out, if you are looking for investment advice, your financial planner should be able to help you understand your risk profile, deliver insights on current market conditions and recommend appropriate investments when positioning your portfolio.

You may find the planner is only qualified to advise you on certain aspects of financial planning, such as life insurance and retirement planning. If there is something they are not qualified to do, they should refer you to the relevant people, for example, a short-term insurance broker or a tax consultant. 

What does ‘fit and proper’ mean?

Under the Financial Advisory and Intermediary Services Act, all financial advisers or planners should be “fit and proper”. This means that their qualities should include integrity, honesty and competence. Bam says examples of this include: 

• Keeping promises;
• Standing up for what is ethically acceptable;
• Acting on principles that go beyond mere legal compliance;
• Making recommendations as if every decision and action would be open to public scrutiny; and
• Continuously enhancing the credibility of and trust in the profession.

Your planner should also have an office where they can store your financial documents and keep records of all communications with you; and their own personal financial management should be in good order. You don’t want a financial planner who is overindebted or not able to keep track of their money. If they can’t manage their own finances, how will they be able to advise you on yours? 

Longevity

When you choose a financial planner, bear in mind that this is a long-term relationship. You need to choose a planner whom you trust and ideally, who is not too much older than you. If your planner is a great deal older than you, you should ask them for details of their succession plan; and what will happen to your personal financial documents in the event of their death. 

Fees vs commission

The financial planning industry has long since moved away from commissions towards a fee-based model, although there are still commission models available for those consumers who don’t have funds available to pay upfront fees. 

The rationale behind the fee-based model is that instead of an adviser being incentivised to sell you a product based on commission, they will recommend the product that is best suited for your needs. A fee-based planner will discuss their hourly rates with you upfront and although it might be a grudge purchase, remember that your financial health is at stake and this could be one of the best ways to spend your money. Think of it as paying a doctor to take care of your financial health. 

Independent vs tied financial planners

There are two types of financial planners: those who are independent and those who are “tied” to a particular financial institution. An independent financial planner is able to advise you on any product in the market, while a “tied” financial adviser will only present you with the products that are supplied by the financial institution they work for. You want an independent planner who can give you the best array of options without the restriction of a single financial institution. 

Choosing a financial planner is a great deal like choosing a life partner. Take your time, and put in the research to avoid tears later in life. DM

This story first appeared in our weekly Daily Maverick 168 newspaper, which is available countrywide for R29.