The majority of South Africans who use a financial adviser (FA) are either “satisfied” or “very satisfied” with the advice they receive, according to a Baseline Survey on Financial Literacy published by the Financial Sector Conduct Authority.
Yet, few respondents in a recent Sanlam study make use of financial advisers; with some 67% relying on their own resources – including the internet.
We explain how a certified financial adviser can make a significant difference to your money strategy, and we debunk some of the myths surrounding the industry.
Tip: A financial adviser can help you make the most of your savings and investments.
1. FAs can help you make the most of your money
One of the major misconceptions about financial advice is that you need to be wealthy to retain professional financial advice. However, according to Marc Joubert, an independent financial adviser at Oracle Broker Services, “If you have a limited budget, a financial adviser is arguably even more important.
“While an adviser may cost a little extra,” Joubert says, “he or she can help you to navigate the complexities of financial planning. It’s an art form to allocate your budget to a solution for your specific needs.”
2. FAs can help you make less emotive decisions
FAs are good at keeping our fears or greed in check, preventing us from cashing in our savings, or falling for a crypto scam, for example.
“Money is an emotional subject. It’s an adviser’s duty to help you make the right decisions,” notes Joubert.
“A financial adviser is like a coach. They’re impartial, they cover your blind spots, they help you to understand the things you can’t grasp, and they guide you towards better outcomes,” says Grant Van Zyl, a certified financial planner at The Wealth Room.
“They don’t make your financial decisions for you, but they provide you with as much information as possible for you to make more informed decisions.”
3. FAs help to demystify the financial services industry
Financial products are complex, and the fine print can be intimidating.
“Subtle differences in the structure of insurance benefits, for example, can mean the difference between being paid out for a claim or not,” says Joubert.
“Simply throwing a savings plan or a generic, off-the-shelf insurance product into the mix can waste your money, and you may not get what you need when it comes to claiming or using your savings.”
A good FA can explain the jargon and keep you abreast of the latest industry developments.
“Don’t try to keep up with the complexities of financial products. This is a full-time job for professionals. It’s a mistake to do your own financial planning as a sideline,” Joubert points out.
4. FAs can offer holistic financial advice
Holistic advice considers your entire life circumstances, goals, and financial position before making product recommendations. This takes time, and involves a thorough examination of your income, assets, debt, expenses, family situation, and dreams.
It’s important to note, however, that not every financial adviser can offer you holistic financial advice, particularly if they are “tied” agents working for specific service providers.
“These agents may try to sell you products that are not ideal for your financial circumstances,” cautions Van Zyl.
He recommends choosing an independent FA with a “whole of life” approach, who can answer every question you may have as your financial position evolves. “They should partner with you on a lifelong journey,” he points out.
5. FAs can be held accountable if something goes amiss
Registered financial advisers are governed by strict legislation that empowers clients to obtain better advice and products.
“Clients should be able to challenge an adviser or service provider if they don’t get what they’ve been promised,” notes Joubert.
He says not every “expert” is licensed to give advice, and you may have a nasty surprise if you give your money to them. You will have no recourse if they’re not registered with the Financial Sector Conduct Authority (FSCA).
How to find a good financial adviser
Van Zyl advises finding a licensed financial adviser on the FSCA website. “Check your adviser’s FSP number with the FSCA before proceeding,” he cautions.
Your FA should inform you of the category of business they’re qualified to advise you on, whether they have professional indemnity, and who to contact if you have any complaints.
Note that even registered financial advisers can offer poor advice, so do a lot of research and don’t be afraid to question them about their track record and affiliations.
Tip: Getting out of debt means freeing up your funds. Find out more about debt consolidation today.