WHAT TO LOOK FOR IN A FINANCIAL ADVISOR

A good financial advisor’s value cannot be overstated. But how do you know which one is best for you? Consider the following.

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TYPE OF ADVISOR:
These days, you can opt for a robot advisor or a traditional one. With a robot advisor, you complete an online survey about your financial position and objectives. Then, the robot advisor provides financial planning services using algorithms – such as a simple account setup, goal planning, portfolio management and customer care. Fees are usually less than a traditional financial advisor. Robot advisors can be a good fit for young investors comfortable working digitally and whose finances are straightforward.

However, choose a conventional advisor if your finances are more complex or you are not that tech-savvy. They will consult with you one-on-one and can help you meet your short- and long-term financial goals. They will build a relationship with you that usually involves an annual review of your portfolio. So, when your life situation or financial goals change, for example, you get married, are retrenched, have a baby or there is a death in the family, they can adjust your plan.

TRUSTWORTHINESS:

You put your financial future in your advisor’s hands, so trust is essential. Ask for referrals from financially knowledgeable friends and colleagues whose judgement you respect. However, before you meet a potential advisor, check their credentials. The industry is regulated, and advisors and the companies they work for need to be licensed by the Financial Sector Conduct Authority, says David Kop, Co-founder of FI Consult and former director of the Financial Planning Institute (FPI) of Southern Africa.

A Certified Financial Planner has met the professional standards set by the FPI. These include a postgraduate qualification, experience and examinations, and agreeing to the FPI’s Code of Ethics. The FPI also ensures members stay up to date with continuous professional development.

EMPATHY:
It’s essential to have a good relationship with this person, as you will be divulging your earnings and your dreams to them. Do they spend time getting to know you, show an interest in you, ask questions and listen? Do you feel comfortable opening up to them? It is crucial that they genuinely understand your needs and wants, address them to your satisfaction, and keep you motivated to achieve your goals.

TRANSPARENCY:
Ask how the advisor gets paid. Do they operate on commission, which may motivate them to recommend financial products that serve their interests rather than yours? Or do they charge a fee, which may make them more independent (although even independent advisors can wind up as salespeople for a company.)

There is no standard fee for financial advice. Some advisors charge per hour. Others charge a fee based on a percent of the assets they are managing, so when your assets increase, their fee does too. This can be an incentive for them to promote your financial well-being.

CLARITY:
Can they explain financial matters to you clearly without leaving you feeling confused, intimidated or incompetent? Do they make you feel pressured to agree to a suggested investment or sign a document without fully understanding it? Do they ensure you understand the relative risks of investments to grow your money?

Of course, every investment involves a degree of risk, and your portfolio should be decided depending on how much you can safely afford to take. But, again, your advisor should guide you through this.

CONTINUITY:
Finally, ask what would happen if the advisor should change companies. This can happen in any profession, and they may not be allowed to contact you in their new company. Would your account be passed on to someone you’re unfamiliar with and may not have your interests at heart? Above all, when choosing a financial advisor, you need peace of mind.

To verify if an advisor is registered with the Financial Planning Institute, visit www.fpimymoney123.co.za, call 011 470 6000, or email info@fpi.co.za

TEXT BY GLYNIS HORNING

IMAGE: GALLO IMAGES/GETIY IMAGES