By: Doshguide
Finding the right financial advisor who will act in your best interest will help set you up for success. While there are plenty of financial advisors in South Africa who would be happy to partner with you, the quality of advice they offer can vary considerably.
Here are some questions to consider when searching for a great financial advisor: 1. What solutions can the advisor offer you?
Some advisors are tied to a specific company with limited options, while others are independent and can provide a broader variety of solutions that may better suit your needs. An independent advisor may offer a more tailored approach to meet your unique financial goals, so be sure to ask about this to ensure you're getting the best fit for your needs.
1. How is an advisor compensated?
Many financial advisors earn commission by selling financial products, or charge a percentage of assets under management (AUM). While there is nothing wrong with charging a percentage or earning a commission, one has to be careful that a financial advisor doesn’t let this influence the objective advice they should be giving.
There is a model where you are offered assurance that your advisor is committed to your long-term financial success without being distracted by earning commissions. This is the subscription-based model: where you pay a flat-recurring fee for ongoing, holistic, objective financial advice.
This flat-fee subscription model is growing in popularity in South Africa, whereby the financial advisor does not earn a commission.
2. What is the process to achieving financial wellness?
A great financial advisor will guide you through a structured process to assist in improving your financial wellness:
1. Trust-building: This is the start of your journey, and is about getting acquainted. Together you’ll unpack your current financial situation and discuss how you can craft goals in order to improve it. In turn, you will also get the opportunity to better understand your advisor and how they are compensated, to decide if they are a good fit for your needs. This is the first step needed in building a strong foundation for your client-advisor relationship.
2. Goal-setting: This is the stage in which you and your advisor work closely together to outline any short-term and long-term goals. Are you saving for your retirement? Want to buy a home? Are you wanting to travel next year? Or are you looking to get engaged? By going over what it is you want to achieve, your financial advisor will give you specific recommendations and suggest particular products like investments or insurance policies.
3. Taking action: Now that a plan is in place, it is time to implement it. Your advisor may handle particular technicalities, like asset allocation and account setup, but you will also be required to be actively involved. You may need to manage your spending habits and stick to an agreed budget plan. In this partnership, your advisor’s efforts can only be effective if you fulfill your responsibilities.
4. Check-ins: Your advisor should schedule regular review meetings with you to assess whether the plan you’ve created together is still aligned with your circumstances and goals. Should circumstances change, your financial plan should adjust accordingly. By having regular check-ins, your financial strategy will remain flexible to your changing needs, within the context of a long-term relationship with your advisor.
Choosing the best financial advisor for your unique needs is critical to ensuring you get the support and sound advice that you need. Advisors solely incentivised on product sales may focus on step three while neglecting the other important steps of building your financial freedom.
* Doshguide is a financial advice platform.
PERSONAL FINANCE