ARTICLE IN PERSONAL FINANCE

The right financial planner for you may be only a mouse-click away

Article in Personal Finance Magazine
Author: Laura du Preez Assistant Editor

One most frequently asked questions is “how do I find a good financial adviser?”.Thanks to the Financial Advisory and Intermediary Services (FAIS) Act and the internet, it should soon become a lot easier to find an adviser.

A new website, Find an Advisor (http://www.findanadvisor.co.za), has been set up to give you a searchable database of advisers who have been licensed as financial service providers (FSPs) in terms of the FAIS Act.

Currently the site bears the names of advisers who have not yet received licences but who applied for these before October 1 last year, and are therefore able to continue practising.

However, according to Chris Preen, the certified financial planner who started the website, after the cut-off date for the issue of licences – which has yet to be announced by the Financial Services Board – no unlicensed adviser will be listed on the site.

Preen says the site is a response to the need for consumers to be empowered to make informed decisions when choosing a financial adviser.

“We live in the information age and people are no longer satisfied with just a name and number in the Yellow Pages or a call from the guy you play golf with. People need meaningful, objective information so that they can make proper decisions,” Preen says.

On the home page of this website, you need to select the dialing code for the area in which you want to consult an adviser. At the moment the site covers 17 dailing code areas and there are 91 advisers listed on the site.

Then you can also select the various financial planning disciplines that you would like the adviser to be able to help you with. For example, retirement planning, investments, estate planning, life and disability assurance, medical schemes, short term insurance, and so on.

You also need to answer two questions about yourself regarding your age group and whether you are a professional, self-employed, retired, contract worker, newly-married, contract worker or other. Preen says these details are included in the filters used in the search engine to ensure that only the advisers that best meet your needs are returned in the results.

Then you should be returned a list of suitable advisers. You can view details of each adviser on the list, including:

• The name of the advisers’ employer or business. From this you can ascertain whether the adviser works for a large institution, with the peace of mind that that may offer, or completely independent in a small business or self-employed.
  
• His or her photo. Although looks shouldn’t count, it is important to find an adviser you can relate to, and that may mean a particular age group or gender or simply the right look
  
• His or her qualifications. The top qualification in the industry is a Certified Financial Planner (CFP), which is recognised internationally as the premier financial planning qualification. But there are numerous other degrees, diplomas and courses which a well-qualified adviser may have completed, including a B.Com, a Certified Financial Analyst (CFA), an MBA, a higher diploma in tax, a chartered account (CA) or an LLB.
  
• His or her experience Preen says you should look an advisers qualifications in conjunction with his or her experience, as qualifications without the necessary experience is often meaningless.
  
• The fields in which he or she can give advice. Your search should only return advisers who are able to offer the services you requested, but should also look at what other services the adviser can offer. Preen says many areas of financial planning overlap and in some instances it is better to employ a "general practitioner" who has a good overview of many areas and can offer integrated, holistic advice. However, he says, if the service you require is of a complex and specialised nature, it may be better to approach an adviser who only works in one or two areas, as he or she will no doubt have more in-depth knowledge.
  
• His or her areas of expertise;
  
• The financial services companies or product providers he or she represents – from which you can get an idea of whether the adviser can shop around for you. If you want help with a specific product or policy you already have, you can check whether the adviser has contacts with the company concerned.
  
• Whether he or she earns more than 30 percent of his or her income from any one of these companies – this gives you an indication of the adviser’s independence and advisers are required in terms of FAIS to give you this information.
  
• How he or she is paid, for example through a fee or commission. Most advisers make a living from commission, but there is the potential for the adviser to be biased towards the products that pay the highest commission, rather than selecting the best product for you. As a result there is a growing trend internationally towards advisers charging a fee for their service. This fee may be offset by any commission paid by the product provider. It is important that you know how an adviser charges for his or her services and that you negotiate the charges before you take advice.
  
• The minimum level of premium or investment the business accepts, for example R100000 lump sum and R1000 monthly premium. This will give you an idea of whether or not the adviser is suitable for you.
  
• The legal structure of the financial planning business – this gives you an indication of the size of the business and helps you to understand who you are dealing with, Preen says. It can also be important if the adviser gives you bad advice.
  
• The number of staff in the organisation – this gives you an indication of the level of support the adviser has and how efficient he or she will be in dealing with the administrative aspects. However, you choose a large company, you should expect that you will not always get to see the head adviser, unless you are a very high-net worth client, Preen says.
  
• Whether or not the business has indemnity insurance and if so, how much – this is important if you suffer a loss as a result of the advice you are given or the adviser’s negligence, and you claim against the adviser. Indemnity cover is especially important if your adviser is self-employed or in a small business that may not have enough assets to cover your claim.
  
• His or her email, telephone and business website address.

Preen says there is more to finding the right adviser than the criteria on the website. Only after a face-to-face meeting will you know whether you are comfortable with the adviser and confident that he or she can advise you appropriately.

He says you should also establish:

How often you will meet with each other;

Who you will be dealing with (the advisor personally or an assistant);

How often you will receive written updates on your policies/investments; and

What will happen to you as a client if the adviser leaves the business or the industry.

The Findanadviser site also a page of contacts which you will find useful if you want to get in touch with any of the ombudsman who deal with financial advice and product problems. It also invites you to pass on information about advisers on the site who you feel have provided you with unprofessional or unethical advice. Complaints will be investigated and could result in an adviser being removed from the site. Any adviser who is S-references (see below) will immediately be removed.

Another useful page on the site explains your rights as a financial services consumer as provided for in the FAIS Act.

In addition you can download a copy of the General Code of Conduct of the Act is available to download at the bottom of this page.

The Financial Planning Institute (FPI) also has a search facility for financial advisers on its website www.fpi.co.za On the left hand navigation bar look for the “Find a Financial Adviser” link. Click through again on the “Find a Financial Adviser” link. Then you can decide what qualification you would like the adviser to have and search for all the planners with that qualification in a region or city.

The qualifications you can choose from include a Certified Financial Planner (CFP) – the highest qualification, an Associated Financial Planner (AFP) – the next highest qualification, or a Registered Financial Planner (RFP).

Alternatively, you can search for an adviser you may have heard of by his or her surname.

But the results are a bit disappointing. Aside from the qualification which you choose to find results on, the information on each adviser is restricted to his or her name, contact details and the suburb in which he or she operates.

In addition, the search results include CFPs, AFPs or RFPs who are no longer practising advisers.

The FPI is apparently working on a revamp for the site, but details were not available at the time of going to press.

The Life Offices Association (LOA) website (http://www.loa.co.za) has not search facility for advisers, but it does allow you to check whether an adviser has been S-referenced.

The S-reference system is a system of self-regulation within the long-term insurance industry, whereby the public at large, and the industry, are protected from persons who are not fit and proper to be engaged in the business of marketing the products of the industry, or in directly controlling or training those who are so engaged.

An S-reference can be imposed upon an intermediary for up to five years (or shorter as determined by the S-reference panel). After the expiry of the 5-year (or shorter) period, the S-reference lapses.

In order to search the database of S-referenced advisers you need to enter the identity number or name of the adviser.

The Financial Services Board (FSB) says it will be making information regarding financial advisers who have obtained licences available on its website (http://www.fsb.co.za) and through its call centre. Russel Michaels, the FSB’s spokesperson says the final format of the information has not been finalised, but it will include, amongst other, information regarding the licence categories and sub-categories for which the financial service provider (FSP) is authorised. The site and call centre will also have a list of the FSP's representatives.

Article in Personal Finance Magazine
Author: Laura du Preez Assistant Editor