The end of financial planning as our parents knew it

I CAN clearly recall my first encounter with a “financial planner” – the guy who looked after my parents’ money. In reality, he was a full-time pastor with a side project hawking policies to the members of his congregation. He had no real experience in financial planning and he had no qualifications, except for a certificate from a two-week training course he’d done with one of the big life insurance companies.

He ended up selling my mom a few education policies that were supposed to be sufficient to see me through university, and after that we never saw him again. Needless to say, the policies barely paid out enough to cover my first semester’s tuition fees. Two decades have passed since then, and the role of a financial planner has changed considerably: there has been a clear shift away from a product broker towards a highly skilled professional. Here are five reasons:

1. Regulation and compliance.

For many people, compliance is a burden – something you have to do. It’s also complicated. If you have a detailed portfolio with diversified investments, it can be difficult to keep track of whether or not you’re toeing the line, particularly if you have offshore exposure or bespoke tax requirements.

Part of the reason financial planners such as my parents’ pastor got such a bad reputation was that they played down the need to be compliant and suggested that such “annoyances” could be swept under the carpet with a wink and a nudge.

This is no longer the case. For the modern financial planner, being compliant and ethical is an integral part of their role as a professional. It’s core to what they offer and a non-negotiable part of who they are.

Put simply, if you consult with the right planner, you shouldn’t have to worry about compliance. Ever. This frees you up to focus on more important things, such as how to save and invest smartly so that you live the way you want to live.

2. Higher qualification standards.

That dodgy would never have been able to call himself a financial planner today.

To become a Certified Financial Planner (CFP) through the Financial Planning Institute of Southern

Africa, a candidate must first obtain undergraduate and postgraduate qualifications in financial planning from an accredited institution, and then gain three years’ experience. Only then can he or she write the professional competency examinations. Many advisers entering the industry have gone even further: they have honours and master’s degrees in related fields such as taxation and finance.

If you see the CFP designation behind someone’s name, you can rest assured that the adviser has achieved the highest professional qualification worldwide in financial

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planning. She will know her stuff.

3. Specialist services.

You might visit a GP if you have a cold, but if you break your collarbone falling off your mountain bike, you’ll go to a specialist orthopaedic surgeon. A CFP professional is like that specialist, but for your finances. No two portfolios are alike and people in different phases of life have different financial requirements. You might require expert advice in a particular area, such as retirement, offshore or tax – if your regular planner can’t help, he or she will be able to refer you to a professional who can.

4. The client comes first.

I’m not going to sugar-coat it: in the past, unscrupulous planners have taken kick-backs for guiding their clients into certain investments. The technical term for this is “conflicted renumeration” and thankfully it’s on its way out. In various jurisdictions around the world, including South Africa, steps are being taken at legislative level to make sure the consumer is protected and that there’s an alignment between services rendered and fees charged.

5. Behavioural coaching.

The “travelling salesman” type of financial planner is dead – that person you’d see once a year on his whistle-stop tour of the country, laptop loaded with generic PowerPoint presentations.

Technology has allowed us to communicate easily from almost anywhere – your financial planner should be available whenever you need advice. But it goes deeper than that: he or she should also be a sounding board for ideas, a life coach, even a friend. That’s because money is so much more than rands and cents. It’s a necessity, but it can also be a tool to help you live better.

Your financial planner needs to understand you, and make sure that your money does, too. The modern CFP professional bears scant resemblance to the policy pusher of the past.

Ask friends or family for a recommendation and set up a meeting – you’ll be pleasantly surprised.