A study conducted in conjunction with the Financial Planning Standards Board (FPSB) and GfK, a global research firm, revealed that well over eight in 10 consumers believe trustworthiness is a very important consideration when choosing a financial planner. The study was conducted in 19 countries around the world, with a total of 19092 participants who were either primary or shared household financial decision makers.
It is prudent to take time in choosing a credible financial planner to avoid being fooled. This brings me to the first question: What is the difference between a financial planner and financial adviser?
Certified financial planning professionals are required to take Certified Financial Planning (CFP) professional competency exams (known as board exams) and then become members of the Financial Planning Institute of Southern Africa (FPI).
FPI is a South African Qualifications Authority (Saqa) recognised professional body and ensures that people who carry the certified planning designation are qualified, experienced and that their credentials can be checked and verified by any interested persons.
Financial advisers often do not have the postgraduate qualification in financial planning (pathway to CFP certification). They, however, have to be registered with the Financial Services Board.
A genuine financial planner will possess certain traits. He or she will demonstrate that personal financial planning is easy to understand and will ease the implementation of the plan. There are further quality behaviours that should be considered, including the following:
- They have a good reputation;
- They take a proactive approach;
- They don't panic and have a clear strategy;
- They invoke confidence and trust;
- They have a holistic view of your finances;
- They have a support team; and
- They work with you and never chase revenue at your expense.
It is the responsibility of the consumer to also interrogate the intended relationship with a financial planner/ advisor.
A scientific approach is followed by CFP professionals and this includes a six-step process:
- Establishing and defining the professional relationship (the first appointment);
- Gathering information (including your goals, timeframe and attitude to risk);
- Analysing and evaluating your financial status;
- Developing and presenting the financial recommendations;
- Implementing the financial planning recommendations; and
- Monitoring the financial planning recommendations.
- The relationship with your chosen financial planner should be long-term.
Research shows that 37% of those working with a CFP professional strongly agree that they are knowledgeable about financial matters compared to 29% of those working with any financial professional and 25% among those not working with a professional.
*Sekese is a certified financial planner professional and a member of the Financial Planning Institute (www.fpi.co.za). He serves on the Financial Planning Institute investments competency committee and was named the 2016 Financial Planning Institute's media award winner.