By Ray Mhere
The Centre for Applied Research (CAR) reported that the global financial services industry is facing a “crisis of faith”, as clients increasingly question the cost of advice they believe they could have found on the Internet for free.
Nevertheless, statistics still show people who use financial advisers tend to be better off, as they work according to a plan devised for them by a qualified person who, by law, must meet specific minimum requirements.
While the industry may indeed be facing a crisis of faith, the country is facing its own crisis – one of wealth deterioration.
I refer to the latest Momentum Unisa Household Financial Wellness Index, which estimates that the real value of South African households’ net wealth decreased by R828.2 billion from the final quarter of 2019 to the first quarter of 2020.
This estimated real quarterly decline is 52.5% more than the previous largest-estimated quarterly decline of R542.9 billion, which was registered during the Global Financial Crisis (Q3 2008). And while there are a great number of factors at play here, the fact that less than 20% of South Africans have financial advisers is definitely one of them.
What many people don’t realise is that a financial adviser is to a client what a coach is to an athlete.
Of course, an athlete has the ability to train on their own, but a good coach will see things that the athlete would otherwise miss, and will ensure that the best training regime is followed in order to reach their full potential. The exact same can be said for a good financial adviser, who’s ultimate goal is to ensure that their client has the right plan and strategy in place, in order to achieve their full financial potential.
This will mean different things to different people, as no two financial journeys are the same.
Financial advisers are for everybody – not just ‘wealthy people’. “It’s so important to dispel this misconception, as financial advisers are easily accessible and should be used by anybody looking to become financially independent.
In choosing the right financial adviser, I believe it comes down to trust and relatability.
This is why, when looking for a financial adviser, you should “interview” at least two advisers in order to ensure that their interests are aligned with yours and that they are someone you can work with over the long run. Before making your first appointment with them, visit their website, check their credentials, understand what they stand for and whether they offer the services that you require.
Prospective clients are encouraged to meet with the adviser and ask questions in person. Take your time to discuss how your relationship will work, how often you will meet, what you could expect from them over time and how much it will cost you. A good place to start when looking for an adviser is through network recommendations.
After finding the right match, I advise meeting with an adviser at least once a year, not only to ensure that all policies and information are kept up to date but also as a financial health check-up.
Make sure that you understand the products that your adviser has recommended and how they work. Your adviser is now your financial coach and is there to help you succeed. So, don’t be afraid to ask as many questions as it takes for you to get to a point where you are comfortable with your financial plan. Also, be sure to keep your adviser up to date on any major shifts in your life such as child birth, divorce, illness and disability, as they may necessitate a change in your plan.
Nobody’s life is static, but as you grow and change, so too should your financial plan.
And last but not least, there’s no such thing as too much information in the financial advice industry. You’d always rather reveal too much information than too little – this will help your adviser make informed and educated recommendations and ensure all your bases are covered. So never worry about what you should and shouldn’t divulge – rather just disclose everything and trust that it’s an adviser’s job to ignore any unimportant facts and decide what is relevant.
Ray Mhere is the Head of Momentum Investments Distribution
PERSONAL FINANCE