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Personal investing

Considering getting financial advice? Four key questions to ask your adviser

You wouldn’t gamble with your health by not seeing a professional, why do it with your financial future?

Independent financial advisers can make a significant difference to your financial success as they help you make decisions that are right for your circumstances.

Consulting with an independent financial adviser is much like seeing a medical professional. Perhaps you think you don’t need the advice of a doctor, and while this may be ok in the short term, the decision to not see a medical professional could severely impact your prognosis further down the line. However, as with doctors and other medical professionals, not all financial advisers are equal. 

Here are some key questions to ask your potential or current financial adviser:

1.  Are you independent?

There are two types of financial advisers. Those who are independent – i.e. they do not work for any particular product provider and do not earn commission off the products that they sell, and tied agents, who are employed by a product provider and may be incentivised to sell.

Independent financial advisers have the objectivity and experience to help you on a path to reach your financial goals. They also help you to make sense of the wide range of products available and assist you in picking a product that is best-suited for your needs and circumstances.

2.  What are your qualifications?

By law, all financial advisers must be licensed by the Financial Services Board (FSB). To get a licence, they need to pass regulatory exams and fulfil the FSB's Fit and Proper requirements (including honesty, integrity and competency). All advisers must prove to the FSB on an ongoing basis that they are developing and maintaining their professional competence.

Apart from these basics, you should question prospective advisers about their academic or other credentials. Also, be sure to read the disclosure documents provided to you as these will also inform you as to which products your financial adviser is licensed to advise and offer you recommendations on. You wouldn’t see a dentist if you were experiencing a chest pain, so ensure you see a suitably qualified adviser concerning your finances.

3.  What is your fee structure?

Disclosure and transparency are important so it is best to ensure that your adviser explains to you upfront what fees you will pay and how they work.

Fees are usually charged as a percentage of the value of your investment and there may be an initial fee and an ongoing fee. Other advisers use a different fee model entirely, charging for the advice provided directly, as a rand amount, usually an hourly rate. Fees cannot be charged or paid unless you have agreed to them upfront.

Make sure you understand how the fees are structured and what you will be paying at the outset.

4.  How can you help me grow my wealth?

Good advisers spend time understanding your needs and helping you put a plan in place that reflects your goals and your risk appetite. They help you to invest with discipline and understand how emotions can lead you astray in the investing process.

Investors often switch between products or buy and sell investments at the wrong time because the decision is based on emotion. This can destroy the value of your savings. A financial adviser’s role is to help you look at your finances rationally, and to help you not act for the wrong reasons.

Good financial advisers are able to remain focused on your objectives and they therefore play a pivotal role in helping you grow your savings. Maintaining a relationship with your adviser over time should also help to make sure that your investments are adjusted as your needs change, rather than in response to short-term market movements.

5.  Where to find a good, independent financial adviser

A key consideration in selecting an adviser is trust, so a suitable starting point in looking for an adviser is to ask for a recommendation from someone whose judgment you value. You can also use our Find an independent financial adviser service or turn to the Financial Planning Institute of Southern Africa (FPI) for help.

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