Looking for a good financial adviser

Email your queries to martin.hesse@inl.co.za or fax them to 021 488 4119

I’m in the market for a financial adviser. As a customer, what are potential red flags to look out for, or rather, what should my adviser do to make me comfortable that I’m not just being “sold” products?

Name withheld

Shreekanth Sing, Wealth Adviser, PSG Wealth, Northcliff, Johannesburg, replies:

Seeking the assistance of a financial adviser is one of the most important financial decisions you can make.

The role of a financial adviser is multifaceted. Not only will the adviser empower you through the transference of knowledge and assist your understanding around financial literacy, but they will coach you in making rational, informed decisions. “Products” should never be the focus; the focus should rather be on finding “solutions” to your identified needs and to reach your objectives or address your concerns, which, in many cases do not involve the taking up of a product.

In essence, advisers need to act with due care and diligence and ultimately have your best interests at heart. I suggest meeting with a few advisers from reputable, well-known financial services providers and asking for referrals from friends, colleagues and family members.

You ideally want to work with an adviser who is also a Certified Financial Planner, required to meet and maintain strict professional and ethical standards.

The adviser should be able to identify your needs, how the solution recommended meets your needs and the potential implications should an identified risk not be addressed. Identified needs that do not fall in the adviser’s field of expertise should be referred to a specialist who would best be able to assist you, such as in the drafting or reviewing of your will. If the adviser is merely trying to push something on to you, seek another one.

How will war affect my pension savings?

With everything happening in the markets due to the Ukraine-Russia conflict, should I be worried about my investment in the company pension fund?

Name withheld Nerine Brink, Employee Benefits, PSG Wealth, Irene, Pretoria, responds:

From a South African perspective, it must be noted that a retirement fund’s board of trustees must ensure that its members’ interests are protected at all times. This fiduciary duty includes the investing of fund assets. In fact, Regulation 28 of the Pension Funds Act provides that the board’s fiduciary duty extends to a responsible investment approach that will earn adequate risk-adjusted returns suitable for the fund’s specific member profile, liquidity needs and liabilities.

Risk management remains a vital component of the governance of a fund. But while every fund is required to have a risk management policy, the types of risk will vary according to the type of fund.

Thus, in a defined benefit fund there will be risks associated with the solvency ratio, the longevity assumptions and the post-retirement interest rate which may not be found in a defined contribution fund.

The investment performance of the fund assets remains nonetheless the most important factor in determining whether the fund will be able to deliver on the retirement benefits in a defined benefit fund or whether there will be a sufficient amount accumulated in a defined contribution fund for an adequate replacement of income. In terms of a fund’s investment policy statement, the board is to perform a due diligence relevant to the investment before contracting to invest in an asset.

In a similar vein, the board is to consider any matter which may affect the sustainable longterm performance of the asset both before making an investment as well as during the investment in an asset.

How will war affect my equity investments?

I am quite worried about recent movements in stock markets. I have a portfolio of R1.2 million in local shares, mostly consumerfocused stocks and some banking shares. Are there any areas of the stock market that will be less impacted by developments in Ukraine going forward?

Name withheld

Jonathan Fisher, Wealth Adviser, PSG Wealth, Sandton Grayston, Johannesburg, responds:

After ending 2021 on a high note, in 2022 inflation and higher interest rates became a real concern, and through January and February we saw a drop off in world asset prices, including our local stock market. I’m sure your portfolio reflected this trend. Then the Russian war on Ukraine became the new big story, wiping substantial value off world markets. There really hasn’t been a safe place to hide except for the gold market, and the odd mining company here and there. If your view is that this war will be protracted for months ahead, then you should have some gold exposure in your portfolio, either by way of direct gold such as the NewGold ETF, or a gold mining company like AngloGold.

In times of uncertainty gold usually outperforms other asset classes.

Our platinum group metal mining companies, like Amplats, Implats, Northam and Sibanye Stillwater, may actually be beneficiaries of the current RussianUkrainian war.

Palladium is a by-product of our platinum miners. Russia is the largest miner and producer of palladium, which is used in auto catalysts to help clean the fuel. If sanctions start affecting Russian palladium, the price of the metal could increase, and the shortage of supply could be filled by the South African producers.

Miners might not be as badly impacted as the rest of the market: this is due to the continued demand for resources.

Anglo American and BHP Group would be worthwhile considerations. Note that every investor’s risk profile and needs are different, and these options need to be considered in light of a balanced share portfolio.

Steps in drafting a valid will

What is the route to putting a legal will and testament in place, and what are the factors to consider when choosing the right executor?

Name withheld

Graham Lovely, Wealth Manager, PSG Wealth, Claremont, Cape Town, replies:

In order for a will to be valid, certain requirements have to be met. Persons who are at least 16 years old, and who can appreciate the consequences of their actions, are competent to make a will.

A will, however, is a specialised document that should preferably be drafted by a wills expert, such as an attorney or trust company.

The will should start by identifying whose will it is.

The person whose will it is, is to sign each page and have it witnessed by at least two other persons in each other’s presence. Such witnesses should not be beneficiaries of the estate and should be at least 14 years old and be able to give evidence in court.

When a person dies, the executor nominated in the will assumes control of the estate in order to liquidate and distribute the estate assets. A will should confirm that the executor may assume a co-executor and confirm that the executor is not obliged to furnish security for the performance of his/her duties.

While you may want to choose a spouse or adult child to be an executor, it is advisable to nominate a professional such as an attorney. An executor can only be appointed by the Master of the High Court. Factors to consider:

Have previous wills been revoked?

Is the person divorced?

Does a testamentary trust apply for minor children?

Has a legal guardian for minor children been nominated?

Are children to inherit equally, or does collation not apply?