Six candidates have been chosen to participate in the Absa/City Press Money Makeover challenge. They will be asked to question key investment decisions that they make – everything from whether the fancy car they bought or business they started is worth the hassle, to if the lavish wedding they’ve wanted will put them into debt before they can even enjoy a marriage.
You can follow the advice given by the specialist Absa financial advisors, if their investment recommendations apply to you, or you can seek the advice of an accredited financial advisor and establish your own investment goals.
What is good financial advice?
Finding a financial advisor is the easy part. Many financial institutions have tied agents that could help you but you need to be aware that they will only be able to offer the products with which they are affiliated with and you won’t be offered the choice that an independent advisor would provide you. You can find an independent financial advisor through the Financial Planning Institute at FPI.co.za or the Financial Services Board (FSB) has a search function on its website, fsb.co.za, that enables you to check whether a financial advisor is authorised or debarred before you enlist their services.
A good financial advisor should have a sound and up-to-date legal and technical knowledge and should understand your needs, says Lianne Lutz, financial consultant at Women’s Wealth. “They need to have a high level of honesty and integrity together with the ability to present solutions and recommendations to consumers which address their problems and concerns. They need to talk openly about risks, ensuring you understand what they can gain or lose in different scenarios,” says Lutz.
Importantly, advisors need to be transparent about fees. “A financial advisor must provide a breakdown of the fees and indicate to you who gets how much and for doing what. The transparent disclosure of fees will give you an understanding of the fees, costs and other charges payable to the different stakeholders and enable you to consider the impact of such fees on your investments or premiums,” says Caroline da Silva, FAIS deputy executive officer of the FSB.
Technology can also be a great help. Ask what technology they are using and where you can log in to see all you have with them. “The best advisors keep up to date and are investing in technology to ensure a more convenient and transparent relationship with them. If a financial advisor is not providing this type of technology they do not have a plan for the future and you can’t plan a future with someone that has no plan for their businesses future,” adds Eugene Maree from Wealthport.
“An adviser should easily be able to produce client and industry references. If they are not prepared to – be wary,” warns Graeme Tarr a certified financial adviser at Alexander Forbes Financial Planning Consultants.
What is a bad financial advisor?
Typically a bad financial advisor will only be interested in extracting information from you so they can identify products to sell to you. They’re also conveniently blasé when it comes to fees.
“You should be able to get a simple breakdown of fees whenever you ask. If your advisor is vague on fees and can’t give you a simple straight answer then be concerned,” warns Maree.
Bad advisors will also leave you high and dry once they have sold products to you and earned their commission.
“The financial advisor must monitor your financial affairs. It is important that you establish an ongoing business relationship with your financial advisor. The person must always be there to attend to your ongoing financial needs, assist you to review your existing financial portfolios, and also be there for you when you need to make a claim on your policies or draw income from your investments,” says da Silva.
What can you do if you’re getting bad advice?
If you have a feeling that you’re not getting the service you need there’s no shame in asking for a second opinion. Dismissing the bad advisor is a good start. If they’ve made any serious mistakes or acted in bad faith you can always approach the Financial Planning Institute (if they are a member), the FAIS ombudsman or the FSB – who will then investigate your case and debar the advisor.