pick the right financial planner

How to choose a financial planner

Posted  September 15, 2014

You understand the importance of financial planning so you have made the decision to consult a financial planner. Now you face the difficult task of choosing a planner that you can trust with your financial future. How do you choose the right person?

Fit and properUnder the Financial Advisory and Intermediary Services (FAIS) Act, all financial advisers or planners should be “fit and proper”. Some of the qualities that your financial planner should have include integrity, honesty and competence. Your planner should also have an office where he or she can store your financial documents and keep records of all communications with you. In addition, your financial planner’s personal financial management should be in good order. For example, you won’t want a financial planner who has a negative credit record. If he can’t manage his own finances, how will he advise you on yours?

QualificationsAll financial planners are required to have a 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 Services Board (FSB) website at www.fsb.co.za. On the home page, click on “FAIS”, then on the left hand side of the page, click on “financial services providers”. You will then be able to enter the FSP number on screen and if it is a legitimate FSP, you will also be able to verify what the planner is qualified to advise you on. For example, he may only be qualified to advise you on life insurance and retirement planning. Ideally, you want a financial planner who can draw up a holistic financial plan for you and if he can’t, he should be able to refer you to the relevant people, for example, a short-term broker.

You should also look out for CFP® certification from the Financial Planning Institute of Southern Africa (FPI). The FPI is a non-profit professional body for financial planners in South Africa and offers planners the CFP® certification. The CFP® mark is one of the highest qualifications for a financial planner and is your assurance that he or she has met stringent qualification and competency requirements.

LongevityWhen you choose a financial planner, bear in mind that this is a long-term relationship. You need to choose a planner who you trust and who is not too much older than you. If your planner is a great deal older than you, you should be told the details of his succession plan.

Not a family matterYou should also steer clear of using family members as your financial planner – this can go wrong for so many reasons! Always keep business separated from your private life. The potential of a fall-out if an investment goes wrong is too high and you want an independent financial planner who is going to have your best interests at heart.

Fees vs commissionThe financial planning industry is moving away from commissions towards a fee-based model. The rationale behind this change is that instead of an adviser being incentivised to sell you a certain product because he will earn commission, he will recommend the product that is best suited to your needs. A fee-based planner will discuss his 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.

Independent vs tied financial plannersThere 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 he works for. You want an independent planner who can give you the best array of options without the restriction of a single financial institution.

Final wordAs technology permeates almost every aspect of our lives, many institutions now offer financial planning telephonically or even online. While still in its infancy, this is a service that will grow in leaps and bounds as legislation develops to support it. Why not start by doing an online needs analysis?

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