It seems straightforward to assume that a financial adviser will assist you with your finances. But have you really considered what that would entail?
Does a financial adviser do your taxes for you? What role do they play in assisting you with financial products? We consider these questions and more.
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What do financial advisers assist with?
According to Ronald King, director at FIA, the role a financial adviser will have in your finances will depend on their licence, which is based on their experience and qualifications.
“Depending on their licence, they will be able to help you with your life insurance, non-life or short-term insurance, medical aid, and investments,” says King.
“While some advisers will be able to assist with advice on your credit and loan requirements, these are not typically part of the product advice you will receive,” he explains.
That said, King explains that holistic financial planning should also include help with personal financial education and management. For instance, helping clients work on a budget and explaining to them how to make use of debt.
King believes that it’s not all about financial products. It’s about how to best use them in your personal financial journey.
“The role of the financial adviser is to determine what your needs are, to prioritise those needs, and to look for solutions and products that could meet those needs within your risk tolerance and affordability,” he explains.
“Based on the qualifications and experience of the adviser, this could involve writing up a complete financial plan. The adviser will then review this plan on a regular basis and ensure that the solutions and products still perform as expected and continue to meet your needs,” says King.
However, he points out that the most important role of the financial adviser is to ensure that you stick with your plan, even when the going gets tough.
Can they do your taxes?
Leon Swart, director at FIA, recommends using a tax practitioner to assist with taxes. However, many financial advisers are also registered as tax practitioners.
“But even if they’re not registered tax practitioners, your financial adviser should have a working understanding of the tax implications and the results for any proposed financial plan or product in the plan that is presented,” says Swart.
“If not, it would be difficult to correct an ineffective product structure that does not comply with your tax requirements and ultimately increases your tax burden,” he explains.
When you choose a financial adviser, find out whether they’re also registered tax practitioners and ask them about their experience in assisting their clients with taxes. If they’re not confident in this field, it may be best to reach out to a registered tax practitioner for this portion of your finances.
Choose your adviser wisely
Swart says that the knowledge and experience of your financial adviser is of paramount importance, and that you should make sure they know what they are talking about.
He recommends that you do your research on the adviser, get testimonials, and see whether this adviser will suit your needs.
“Look to their professional accreditation as a guide. It sets a standard with which the adviser needs to comply. But ultimately, it’s about the track record of holistic advice they provide, and not only single product advice and sales,” says Swart.
“Besides this, make sure that your adviser has sufficient backing to protect you when things go wrong, either as part of a reputable advisory body or team of professionals. At the least, the legal minimum of professional indemnity insurance should be in place,” he explains.
To assist you with your finances further, go have a look at our various financial calculators.