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First meeting with a financial advisor? Here’s what to ask

When looking for a financial advisor, you need to look further than just qualifications and experience.

Your financial advisor should ideally be someone you can partner with for life, and who you trust implicitly to provide you with independent advice that is in your best interests. When looking for a financial advisor, you need to look further than just qualifications and experience.

If you’re meeting with a prospective financial advisor, here are some questions you may want to ask them.

Are you licensed with the Financial Sector Conduct Authority?

All financial institutions are regulated by the Financial Sector Conduct Authority (FSCA) which is the market conduct regulator for institutions that provide financial products and advice, including banks, insurers, retirement funds, administrators, and market infrastructures, so at the outset, you will need to ensure that your financial advisor’s practice is duly licensed as a Financial Services Provider (FSP). Their licence number, which should take the format of FSP XXXXX, must be reflected on their website, corporate brochures, letterheads, and other marketing material.

An FSP number indicates that the practice meets the stringent requirements set out by the FSCA in terms of experience, qualifications, ethics and operational ability, and that it is licensed to provide financial advice and services. If you want to check if your advisor’s practice is duly registered, you can do a search on the FSCA website by clicking here. Alternatively, you can contact the FSCA directly on 0800 20 37 22.

What are your qualifications?

Establish from your advisor whether they hold appropriate qualifications and credentials to give advice. Specifically, ask whether your advisor holds the Certified Financial Planner® designation which is the internationally recognised standard for financial planning professionals. Holding this designation provides assurance that your advisor is suitably competent to give advice and that they uphold certain ethical standards. To obtain this designation, your advisor will have had to obtain a recognised undergraduate and postgraduate qualification in financial planning, gained three years of work experience, and passed the professional competency exams. In addition to a CFP® designation, establish what other qualifications your advisor has. Many financial advisors have commerce, accounting, or legal backgrounds which are particularly useful qualifications to hold when operating in the financial services industry.

What is your professional experience?

As with most professions, hands-on experience in providing financial advice is absolutely essential so take time to establish exactly what experience your advisor has and how long they have operated in the industry, keeping in mind that the industry is vast, complex, and highly regulated. Question your advisor on their specific areas of expertise to ensure that their experience matches your financial planning needs. For instance, if your advisor has only had experience in the insurance sector, they may not be sufficiently experienced to assist you with your retirement or estate planning. Ideally, seek out an advisory practice that provides the full suite of financial planning advice so that you can centralise your portfolio and ensure that it is holistically managed by a team of experts.

What professional bodies do you belong to?

If your advisor holds the CFP designation, they will be members of the Financial Planning of Institute of Southern Africa which is the recognised professional body for financial planners in South Africa, and the only institution in this country to offer the CFP certification. Certified Financial Planners are required to update their membership annually through the accumulation of continuous professional development points and the payment of membership fees. This is to ensure that all FPI members keep up-to-date with industry developments and ethical standards, and that advice standards remain at a professional level.

How is your organisation structured?

If you’re looking for a lifelong relationship with a financial planner, it is important to ask questions about how their practice is structured, the professional depth of the organisation, and their plans for succession. If something happens to your advisor, who will take over your affairs? How is the passing on of institutional knowledge and client affairs guaranteed? Does your financial advisor have ownership in the business, or can their employment be terminated at any time, leaving you without an advisor?

How do you get paid?

In recent years, the financial planning industry has moved towards the provision of fee-based advice rather than commission, with the result being that the industry has become more professional and trustworthy. Historically, high upfront commissions were used to reward brokers for selling policies and insurance-based investments, which in turn created a perverse incentive for brokers to sell policies rather than provide advice. Most professional financial planning practices now charge a flat fee for the development of a plan, plus an ongoing fee calculated as a percentage of assets under advice charged on an annual basis. By charging a professional fee for their advice, your advisor is incentivised to provide you with advice that is in your best interests, and which will achieve the best outcomes for you over time.

How independent are you?

If your advisor is restricted in terms of which financial solutions they can give advice on, you need to question how this limits their ability to give advice that is purely in your best interests, specifically if they are incentivised to market a certain range of financial products. The financial services industry is huge and, while it is not feasible for an advisor to have the expertise to provide advice on each and every financial solution available, you should ideally find an advisor who is contracted to provide advice on a broad range of solutions with no inbuilt incentives or commissions that could potentially sway their advice. A truly independent advisor will be in a position to continually assess and review the financial solutions on offer in the marketplace, and to ensure that you have access to the most appropriate solutions for your needs. That said, ask your advisor how they choose which service providers they work with, how regularly they assess their services, and what happens if a service provider no longer meets the requisite professional standards.

What services do you offer?

When structuring a comprehensive financial portfolio, it is likely that you will require multi-faceted financial advice including risk cover (insurance), local and offshore investing, retirement planning, tax and estate planning, and potentially business planning. As such, finding a practice that provides the full suite of services will mean that your portfolio can be constructed and managed holistically, and not on a piece-meal basis. There are many moving parts in one’s financial portfolio that need to be viewed together, so find an advisory practice that has these capabilities. If there are specific areas that your advisor cannot provide advice on, ask whether they have any outsourcing contract in place and with whom.

How often will we meet?

A financial plan is a living, fluid document that should be robust enough to adapt to your changing circumstances. Given the nature of life, it’s never easy to predict when and how one’s circumstances will change, and it is, therefore, important to find an advisor who is accessible and available. Ask your advisor to provide details on how your relationship will work: how often will you meet? Who else will you work with in the practice? How regularly will your plan be reviewed and updated? How accessible is your advisor? How is ad hoc advice charged for?

Do you have a service level agreement?

Following this, ask your advisor whether they have a client service level in place and what you can expect in terms of client service. What turn-around times can you expect in terms of phone calls and emails? What reports will your advisor send you and how often? How will your advisor ensure that you are kept up-to-date with important information? How often will they proactively communicate with you? What standards can you expect in terms of compliance, confidentiality, and protection of personal information? How innovative is their technology and software?

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Craig Torr

Crue Invest (Pty) Ltd

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