Updated 06 June 2013

Checklist for your financial planner

Results released from the Finscope 2009 report reveal quite a bit about the country in which we live...


Results released from the Finscope 2009 report reveal quite a bit about the country in which we live:

  • 69% of adults are from households that have at least one person who is unemployed and looking for work;
  • There is a decline in the percentage of adults with formal and informal employment (28% of adults get money from formal employment whilst 16% get an income from informal work);
  • In terms of sources of money, South African adults illustrate a significant reliance on friends or family – 28% of adults get money from friends and family as a source of income;
  • 25% of adults get an income from government social grants;
  • Generally SA adults appear to be increasingly concerned about day-to-day living and expenses, and are increasingly risk-averse and unable to save

This is not that surprising in a country where unemployment is close to 25%, the average life expectancy is just under 50 years, and where 50% live below the poverty line.

It might seem unreasonable to talk about financial planning against this background but it is my opinion that this is all the more reason to get a grip. Where a resource is scarce, it needs to be used wisely…

Everyone should have a financial plan link to story headlined “5 good reasons to have a financial plan”. But because there are so many variables that can (and do) impact, a financial plan needs to be seen as dynamic –financial planning is a process and not an event. Your financial plan needs to be revisited on (at least) an annual basis.

If you choose to use the services of a financial planner then he or she should follow the internationally accepted best practice 6-step process which is is it possible to explain some of these steps?:

  1. Establish and define the client planner– this is where you and your financial planner spell out the nature of your relationship. Who is responsible for what (and by when), and how is your financial planner going to be paid? You should also specify the frequency of your reviews. It is also possible that in some cases you are only engaging their services for a specific issue and the agreement will clarify this.
  2. Gather data and information. In much the same way that your doctor needs to ask questions about your health in order to determine the state of your health or what tests need to be done, so too a financial planner needs to get a whole lot of information about you and your needs in order to correctly advise you. The degree of information needed will usually be a function of the nature of the agreement in step 1.
  3. Analyse the data– this involves a fair amount on number crunching as well as application of the financial planner’s experience and expertise. This is usually done away from the client and the findings are presented in the plan (step 4)
  4. Present the plan– this should be in writing and should be a simple, easy-to-understand document. Watch out for fancy colour documents that are all about presentation but don’t address your concerns. Make sure that you read through the document and that you understand everything in it. Very often the document is discussed at a meeting between the client and the financial planner.
  5. Implement. As a result of the financial plan and the follow-up meeting, you and your planner will agree as to the next steps that need to be implemented. This might involve the purchase of some product or might even something like updating your will.
  6. Review. Financial planning is a process. Every now and again, your financial plan needs to be reviewed. Not too often though. As part of step 1 you need to agree on how often this will be – typically an annual review should suffice, but there are other times when it is prudent to revisit it as well. These would include marriage, divorce, retrenchment, birth of kids and inheritance. It is also highly likely that no changes need to be made to your plan – just because you are reviewing it does not mean that you need more insurance or policies (if you are engaging with a fee-based financial planner then the need for him/her to earn income from the sale of products will be removed and you are less likely to be sold more products at your review meetings).

To find a financial planner start by asking your friends for recommendations and then check out the Financial Planning Institute website to see if they are Certified Financial Planners or not. The CFPdesignation is underpinned by a post-graduate diploma in financial planning and is the top designation for financial planners internationally.

You should also check the FSB website to see that they are licensed; and before you sign across your life, do a background check on the planner. Ask him/her for some names of clients that you can speak to (and then contact them). It is also a good idea (although one that is seldom applied) to ask your financial planner about his/her own financial planning affairs. Are they in order and has he/she taken their own advice? If not, get out of there fast!

(Gregg Sneddon, Health24, March 2011) 


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