Lynn Bolin

Head of Communications and Media

August 2016

5 mistakes people make when choosing a financial adviser

Look out for these common and costly pitfalls before you sign on the dotted line

#1 Sticking with the family

Your uncle Ed has been selling financial products for decades, and he’s done alright, hasn’t he? It’s true that you want to work with someone you trust when you’re deciding how to invest your money, but simply going for what, or who, you know, isn’t always the best way to go. Are you able to be completely honest about your financial situation with someone you have an emotional connection and history with? How has Ed really done for his clients, and wouldn’t it be awkward to grill him about his performance? Similarly, feel free to ask your friends to recommend financial advisers they work with, but don’t blindly go with their choice without checking out their credentials. Which brings us to the next point…

#2 Not checking their background

A list of clients or references shouldn’t be the only thing you ask for. Get a CV as well, hopefully confirming the following: a BCom degree in financial management (certified financial planner professionals need to have a postgraduate qualification in financial planning); at least three years of financial planning-related experience; and adherence to the Financial Planning Institute of Southern Africa’s (FPI) Code of Ethics and Professional Responsibility. If you have any issues in the future, this professional body will investigate the conduct of your financial adviser on your behalf.

#3 Disregarding their overuse of the word “I”

It’s a bonus to have a good relationship with your financial adviser, but you’re paying for their time, so ideally you want to spend the time discussing “you”, not them. If they use your session to talk about their products instead of what you want or need, you have to question whether they have your best interests at heart. Ideally, they should ask you reams of questions about your current financial status and your long-term goals, and then offer solutions to achieve them.

#4 Blindly following their advice

You are one of many clients that your financial adviser works with. Their clients could range from a CEO who has just bought his third holiday home, to a young doctor starting out in the profession and still saving for his or her first home. Every client has different needs, challenges, goals – you’re all individuals, right? So when your financial adviser makes suggestions for shifts in your portfolio, question them. What are the benefits? Are they risky, or too safe? The squeaky wheel gets the oil and all that, so speak up and be heard! You want an adviser who is open to this communication and discussion.

#5 Forgetting to check if they’re over-committed

The administrative demands placed on South Africa’s financial advisers are increasing all the time. This is great in that the laws protect you, as a consumer, but they are making for a pretty labour-intensive profession. It goes without saying that you want your financial adviser to be the kind of man or woman that ticks all the right boxes on your behalf, but once all the admin’s done, do they have time to keep tapped into the markets, the dozens of new products being launched all the time, plus keep their eye on the ball for specific opportunities for you? Ask how many clients they have, and if it runs into triple figures, move onto someone who has the time to commit to you.

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