How to choose a financial planner

Finding the right financial planner for your unique money profile

One of the most common questions asked by financial consumers is: ‘Where can I find a financial planner?’ The standard response is to direct consumers to a list of professional advice practices; but this is only the beginning of the more complex process of matching potential clients with financial planners who understand their unique take on money matters.

Online directories such as www.findanadviser.co.za and www.moneyweb.co.za allow consumers to search the profiles of hundreds of financial planners but do little to give assurances that the shortlisted planner is a sensible match. The ‘Rolls Royce’ of financial planner listings, www.letsplan.co.za, does slightly better by allowing consumers to both search for and verify a CERTIFIED FINANCIAL PLANNER® or FPI Approved Professional Practice™. But none of these lists give any indication as to whether the potential client will ‘get along’ with his or her choice of planner.

Imagine trying to pick a life partner from a list of names and then ask yourself why choosing a life financial partner from a website directory is any different. It is for this reason that referrals play such an integral role in matching planners to consumers. “Industry statistics indicate that most clients are connected to financial planners through a trusted network of family and friends,” says Mark MacSymon, CERTIFIED FINANCIAL PLANNER® professional and proud winner of the 2017 Financial Planning Institute’s Financial Planner of the Year Award.

Regardless of how they were introduced consumers should view their initial meeting with a financial planner in the same way as an employer views a job interview. This ‘interview’ gives the potential client the opportunity to choose a professional financial planner who has the skills and tools to do the job right. Financial planners will use this meeting to explain the benefits of financial planning; disclose any conflicts of interest which might exist; and indicate how fees will be levied for services rendered. They should leave potential clients with a clear sense of whether the financial planning practise can deliver a financial planning experience that is aligned with their needs.

There is no obligation for a consumer to enter into an agreement with the first financial planner they meet. “Interviewing two or more financial planners allows the potential client to gain perspective of the differentiated value propositions and service offerings of various outfits while increasing the likelihood of matching client and practitioner expectations,” says MacSymon. “These meetings should allow enough time for both parties to determine whether or not a ‘fit’ exists”.

During the first meeting a financial advisor should provide proof of passing the relevant regulatory examinations; proof that he or she is a representative of a licensed financial services provider; and proof that he or she is authorised to provide advice and intermediary services on the financial instruments the financial practice advertises. But the standards for financial planners are set higher!

“For greater ‘peace of mind’ consumers should partner with a financial planner who has attained the globally recognised CFP® mark,” says MacSymon. “A CFP® professional will have completed a relevant tertiary qualification (to NQF Level 8), passed the rigorous FPI Professional Competency Examination (board exam), have three or more years of relevant industry experience and subscribe to the FPI’s Code of Ethics and Practice Standards”.

There are a range of other considerations when choosing a financial planner. It is advisable to consider the corporate structure of the financial planning practice so that in the event of the death of the primary adviser the practise can continue. Potential clients should also ask about the financial planning practice’s investment philosophy; understand their financial planning process (is it lifestyle or goals-based); and ask how the planner earns his or her income.

Consumers are extremely sensitive about the costs associated with financial planning. Fees vary from one planner to the next and can be a combination of advisory fees; fees on assets under management; or commissions on financial products. MacSymon suggests that potential clients ask the following question early on: ‘What is your fee philosophy and how does this translate into value based on your proposed service level agreement?’

“The financial planner must articulate a value proposition that translates into real value for the client over the duration of their professional and commercial engagement,” he says. “This value is a cornerstone of good market conduct and speaks to the principle of equivalence of reward – in layman’s terms this is ‘a fair day’s pay for a fair day’s work’”.

Trust is central to any long-term relationship. “Trust is built on a foundation of transparency, communication and consistency – the process takes time, but it is incumbent on both parties to the advice relationship to be open and transparent about qualitative and quantitative information which will have an influence on the financial planning process,” concludes MacSymon. “You can achieve this by having an open-door policy, encouraging clients to ask questions and intervening when clients develop apathy for their financial plan”.