How to choose a fi­nan­cial ad­viser

Do ex­ten­sive re­search be­fore you de­cide on an agent who’ll deal with your sav­ings

YOU (South Africa) - - CONTENTS - BY LETI­TIA WAT­SON Send sug­ges­tions for top­ics and re­quests for info to your­[email protected] We may an­swer your ques­tions in this col­umn but won’t re­ply per­son­ally.

NEED help with your money mat­ters but not sure how to choose an ad­viser? Here’s how to go about it. Firstly, make sure they’re le­git. There are def­i­nitely ben­e­fits to hav­ing a fi­nan­cial ad­viser – some­one who makes sure you achieve your sav­ings goals and build wealth. On the other hand, some peo­ple have bad ex­pe­ri­ences with ad­vis­ers who – after selling them a prod­uct and go­ing on to earn a tidy com­mis­sion with­out hav­ing to do any more work – are never seen again. But the days of un­re­li­able ad­vis­ers are num­bered.

The Fi­nan­cial Sec­tor Con­duct Au­thor­ity (FSCA) is work­ing on the re­tail distri­bu­tion re­view, which will strictly reg­u­late the train­ing, li­cens­ing and pay­ment of all peo­ple who give fi­nan­cial ad­vice, says Eti­enne Gouws, head of Mo­men­tum In­ter­me­di­ary So­lu­tions.


Ad­vis­ers are li­censed by the FSCA ac­cord­ing to their qual­i­fi­ca­tions and ex­pe­ri­ence, and there are dif­fer­ent li­cences for dif­fer­ent types of fi­nan­cial ser­vices.

For in­stance, cer­tain peo­ple are li­censed to sell only life in­sur­ance and fu­neral poli­cies, while oth­ers are also li­censed to man­age clients’ in­vest­ments on their be­half.

You’re en­ti­tled to ask the ad­viser what their qual­i­fi­ca­tions are and what they’re li­censed for. Then, us­ing the ad­viser’s li­cence or ID num­ber or the bro­ker­age firm’s name, you can check this in­for­ma­tion on the FSCA’s web­site ( If the per­son isn’t listed, con­sider it a red flag.

An­other of the FSCA’s re­quire­ments is that ad­vis­ers re­ceive on­go­ing train­ing to stay up to date with de­vel­op­ments in the fi­nan­cial in­dus­try. The FSCA ver­i­fies these qual­i­fi­ca­tions reg­u­larly.


Ref­er­ences are im­por­tant, Gouws says. Ask friends or col­leagues to rec­om­mend some­one and ask your prospec­tive ad­viser if you can call their other clients to ask about their ex­pe­ri­ence too.

Find out from the Fi­nan­cial Plan­ning In­sti­tute of South­ern Africa ( or the Fi­nan­cial In­ter­me­di­aries As­so­ci­a­tion of South­ern Africa ( za) which fi­nan­cial ad­vis­ers prac­tise in your area. Both or­gan­i­sa­tions closely mon­i­tor mem­bers’ pro­fes­sional con­duct.

The FSCA also lists ad­vis­ers whose li­cences have been sus­pended or re­voked.


The FSCA dis­tin­guishes be­tween agents and in­de­pen­dent ad­vis­ers.

An agent rep­re­sents a spe­cific com­pany and can sell only that com­pany’s prod­ucts and ser­vices. Agents can be tied to more than one com­pany but just be­cause they of­fer dif­fer­ent prod­ucts and ser­vices it doesn’t mean they’re in­de­pen­dent.

It doesn’t mean their ad­vice is of a lesser qual­ity but their of­fer­ing is lim­ited.

In­de­pen­dent ad­vis­ers don’t act on be­half of spe­cific com­pa­nies.

They’re sup­posed to of­fer you a range of prod­ucts, quo­ta­tions and in­ter­est rates from a va­ri­ety of com­pa­nies to help you find the fi­nan­cial so­lu­tion that suits you best.


There are two ba­sic pay­ment struc­tures for ad­vis­ers: com­mis­sion earned on in­vest­ment and in­sur­ance prod­ucts or a con­sul­ta­tion fee.

A process in the re­tail distri­bu­tion re­view (RDR) is be­ing de­vel­oped to strictly reg­u­late pay­ments, which means the cur­rent pay­ment struc­ture could change al­though there’s no set date for this yet.

The RDR re­quires from agents and ad­vis­ers that:

There must be a cor­re­la­tion be­tween ser­vices ren­dered and the amount charged. Repet­i­tive fees (such as com­mis­sion) can be earned only if the agent or ad­viser is still ren­der­ing a ser­vice.

In other words, some­one can’t sell you a prod­uct such as life in­sur­ance and then con­tinue to earn com­mis­sion on it even if you never see the ad­viser again.

All fees need to be stip­u­lated clearly in rands and cents be­fore you sign any doc­u­ments. 〉COM­MIS­SION The amount de­pends on the type of prod­uct, but you have the right to ne­go­ti­ate the com­mis­sion, Gouws says.

You can also ter­mi­nate the agent’s or ad­viser’s ser­vice if in the fu­ture if you aren’t sat­is­fied with the ser­vices. You’ll then need to no­tify all fi­nan­cial in­sti­tu­tions where you have in­vest­ments, as well as those your (now former) ad­viser/ agent has ties with, in writ­ing that you’ve ended the man­date. 〉CON­SUL­TA­TION FEES These de­pend on the type of work an ad­viser does for you and the amount of time they spend with you.

For ex­am­ple, a YOU reader con­sulted an ad­viser about his re­tire­ment in­vest­ments.

The ad­viser an­a­lysed the reader’s ex­ist­ing in­vest­ments then spent about an hour ex­plain­ing changes he pro­posed to in­vest­ments that weren’t grow­ing.

This one-off in­for­ma­tive ses­sion cost about R900.

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