Mzu Fayo | Financial Adviser | Consult by Momentum | mail me |
Election season is upon us, and South Africans will soon head to the polls to decide who gets their vote. Between campaign posters and passionate debates around the braai, there is plenty to consider before ticking that box.
However, another decision deserves just as much consideration, even if it does not come with a ballot paper: who do you trust to help you manage your money?
Your financial adviser may not be responsible for fixing potholes. However, they could help you make decisions about your children’s education, your retirement or what happens to your family if you can no longer provide for them. Therefore, you need to know whether you can trust their judgement. Before you make your mark, here are five things worth considering when choosing a financial adviser.
Know what they stand for
Every candidate has a manifesto. Likewise, your financial adviser should have an approach to money that you understand and feel comfortable with. Some advisers focus on long-term wealth creation, while others specialise in helping families protect what they have.
Ask how they approach financial planning and what they consider most important when recommending products. Do they assess your finances as a whole, or does every conversation seem to end with something new to buy?
A good adviser should also explain their recommendations in plain language. If you leave meetings feeling more confused than when you arrived, something is not working.
Don’t fall for campaign promises
We have all heard promises that sound wonderful on paper. However, when it comes to your money, anything that sounds too good to be true deserves closer scrutiny.
Be wary of anyone promising guaranteed high investment returns or suggesting you can make a quick buck without taking any risks. Investments can rise and fall, and an adviser worth trusting will acknowledge this openly.
When markets become volatile, an experienced financial adviser will usually discourage reactive financial decisions driven by emotion. This is because markets tend to level out over time, as we saw during the COVID-19 pandemic. Furthermore, your adviser should explain any fees transparently. They should also clarify why a particular recommendation suits your unique circumstances. Ultimately, a realistic plan beats an impressive sales pitch every time.
Make sure they understand your constituency
A 28-year-old saving for a first home has very different priorities from someone supporting elderly parents while trying to put children through university. That is why a good adviser spends more time asking questions than pushing products.
They need to understand how far your money must stretch every month. Are you lying awake at night counting coins, or are you ready to take the leap and start your own business?
Your answers should guide their recommendations. After all, your financial plan should fit your life, not their product quota.
Check their track record
You probably would not hire someone to fix your roof without checking their references and experience. Choosing a financial adviser deserves the same care.
In South Africa, you can check whether an adviser and the business they represent have the appropriate authorisation through the Financial Sector Conduct Authority. Additionally, do not hesitate to ask about fees. Your adviser must legally disclose what you will pay for their services, including any commissions they may receive.
Before choosing a financial adviser, take the time to verify their credentials and understand their fee structure. This will help you make an informed decision about who manages your money.
Hold them accountable after election day
You have cast your vote, but the real work starts now. A financial plan should not be something you sign once and then forget about. Your life will change, and your finances must keep pace.
For example, a new baby might require you to review your life cover. Similarly, a promotion could give you room to increase your retirement savings.
You and your adviser should agree on how often you will review your plan. You should also establish what communication you can expect between meetings. Above all, you should always feel comfortable asking questions or requesting explanations when something does not make sense.
Ultimately, choosing a financial adviser is not about finding someone with the most impressive promises. Instead, it is about finding someone who understands your needs and can help you make better financial decisions as your life changes.
Just like an election, choosing a financial adviser is an important decision. However, unlike an election, you do not have to wait five years to reconsider your choice. If your adviser no longer meets your needs, you can place your cross next to someone else. After all, the right advice can make all the difference.
