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Cape Town - You've been thinking about working out a sound investment strategy, but aren't sure how to go about finding a reputable adviser. So how can you be sure that the candidate you have in mind will look after your best interests - and not his or her policy commission?
Pieter Theron, portfolio manager at New-e-conomy Financial Group, lists some points to consider.
1. Licence
Is the adviser registered as a financial services adviser, either by association or in his or her own capacity? A sure way of knowing this is if they provide a licence number. This will enable you to visit the Financial Services Board website to check out if they are properly licensed and regulated.
2. Professional association
A professional adviser will be well qualified in a financial field and should be associated with a professional organisation. The most well-known of these is the Financial Planning Institute. Members of this association will have the CFP trademark on their business cards and stationery.
3. A diverse product range
Your adviser should understand your unique situation and plan according to that.
But are they truly as independent as they claim to be? Some may say they are, but offer products from only one or two providers. Watch out for bias towards one product provider because of the adviser's association with the company.
Red flags should go up when an adviser is tied to only one specific product provider.
Is the adviser really capable of managing your investment for you? This will only be the case if he or she has an FSP2 category licence, which gives them the authority to manage and amend investment portfolios on your behalf.
5. Disclosure of fees
Advisers should disclose all fees to their clients. These fees should also be fair, and in accordance with the actual work done.
Watch out for advisers who charge high upfront fees and still make use of costly investment vehicles to feed their own needs and pockets.
Investment costs can be one of the biggest value-destroying factors on your investment portfolio, so this should be an important consideration when choosing your adviser.
6. Continuity of business
What happens to your portfolio and its management if your adviser is put out of commission? There should be some kind of long-term sustainability plan.
7. Good old gut feel
Trust your instincts. Referral is usually a good barometer for sound advisers. And remember the old adage: if it sounds too good to be true, it usually is.
The offshore option
All good and well for South Africans who are staying put. But what about those of us with financial interests abroad? Greg Stockton, Africa divisional manager of deVere Group, tackles the topic.
He suggests seven questions you should ask a potential adviser:
1. Do they have authorisation?
All advice given in South Africa, even for investing offshore, should be provided by a company and an individual registered with the Financial Services Board. You can easily verify this by checking out the FSB website.
2. Do they have a global presence?
It makes sense to work with a company that is located worldwide to make sure you receive continuity of service if you should relocate. For this reason a company holding a physical presence globally, within all the major cities, would be strongly recommended.
If you are looking for long-term service, be sure to check if the company has offices in your potential future residences. It should also be regulated in all the markets in which it operates, as well as in South Africa.
3. Have you been given more than one option?
An independent advisory firm should be able to offer a range of trust services, product services and investment options. Ask them to show you several different choices to give you peace of mind before agreeing to the advice.
4. How long has the company been in operation?
Ideally, you should choose a company that has been operating in the marketplace for more than five years. This will give you a more accurate, longer-term gauge of the firm’s quality of advice, service and compliance history.
5. What is the total value of assets under management?
Total assets under management of more than $4bn would suggest some degree of critical mass in the industry, a significant share of the market, longevity in the industry and a robust organisational structure.
6. Do you have full disclosure of fees and charges?
All negotiations should be upfront and transparent from the start. Any agreements you enter into should disclose how charges are made, how much will be charged, service expectations and levels of protection.
7. Is there a disciplinary track record?
Multiple complaints and offences are typically, and quite rightly, flagged and reported to the regulator – in South Africa, that would be the FSB. It would be worth checking whether the adviser or his or her company has a track record in this regard before agreeing to work with them.
You can use the FSB and/or ombudsman websites to do this.
- Fin24
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