Cutting out the experts will hurt in the long term

LEST you believe that most financial planners do not have their clients best interests at heart, let me ask a simple question.

LEST you believe that most financial planners do not have their clients best interests at heart, let me ask a simple question.

How often have you called your financial planner to meet you because you need more life assurance or you are ill-equipped in terms of saving for retirement?

Before you truthfully answer this question - in most cases a negative answer, think back to the number of times your financial planner has called to ask to see you and the number of times you have turned them away.

I always tell my sales team that if they receive one call a month from a client asking to buy more cover or investments, they are very fortunate.

Financial planners have costs in their businesses just like all other professionals. One expects to pay accountants, lawyers and doctors consultation fees, but when it comes to the broker or agent, new thinking is to deprive them of their livelihood, namely commissions.

Over the past few years, the spotlight has been turned on this issue because of the various rulings made by the Pension Fund Adjudicator and Financial Advisory and Intermediary Services (FAIS) ombudsman, who have commented on the high costs levied by insurance companies on policies when they are either terminated or reduced.

While I agree that a solution needs to be found to ensure consumers are protected, saving for retirement must continue and the only way at this time that the public will save is if these financial planners are allowed to earn fair and reasonable remuneration for the work they do.

For the record, a 35-year-old taking out a R300 a month retirement annuity to age 55 will earn the broker commission of about R2900, a portion thereof paid in the first year and the balance spread over five years.

Compare this to the fees charged by other professionals and it will be obvious that these are certainly not exorbitant costs.

The question you need to answer is how many hours did the broker spend with you, analysing your requirements, researching the market and identifying the right product for you.

There is a trend emerging whereby individuals are trying to make investments and buy life insurance direct from insurance companies, hoping to save costs. This, however, could present a problem as products purchased may not be ideally suited for your particular needs.

The industry has changed rapidly with the introduction of the FAIS Act which requires financial advisors to be licensed and knowledgeable, thoroughly assess an individual's needs, provide appropriate advice and ensure costs and advice are in writing.

I receive many calls from my radio, TV and newspaper articles, asking for advice and so often there are so many important questions that are unanswered which support my views that one needs to sit down with a financial advisor to ensure that one's financial needs are understood prior to making any long-term decision.

l The writer is a director of Bryan Hirsch Colley and Associates. Helpline 011-880-4888.