Who needs a financial adviser?

According to a recent survey by the Financial Planning Institute (FPI) of Southern Africa, the reasons why consumers are wary to pursue financial planning are 70% because of lack of trust, 62% of affordability and 55% because they do not know where to start.

Fin24 

Financial advisers (FA’s) have a lot of baggage to deal with, but we cannot deny that they have a role to play in society. 

Many people will claim that they prefer Dave Ramsey over a personal financial adviser, yet this does raise questions about how the financial situation of various people can differ.

Imagine a person who owns 8 properties. As a bonus, he has 451 children from 231 wives and no life insurance. He also has credit card debt that amounts to the GDP of Nigeria and would like to retire in the Bahamas. this might sound like a simple calculation, yet can be increasingly complex when starting to ask questions such as planning for short term financial goals, retirement, tax efficiency and the needed insurance (short and long term).

Not all FAs are bad

As some might know, I hold a 4 year degree in art directing BA(HONS) Information Design. This is a fancy name for graphic design. When trying to explain to people what’s the difference between graphic design and art directing, I would normally just default to I specialise in idea creation. 

This still did not remove the label of being a graphic designer. I had many clients who would say things like “well, my son did a course in Microsoft Word and he is really good with colours and stuff”.

It’s exactly the same with financial advisers – some are good and some give the industry a bad name. Sadly in the past, it was easy for any Tom, Dick and Harry to become an FA.  They signed up with large insurers, did a weeks training and were sent out with rate books to sell policies. Over the last decade or so, there have been some serious attempts to clean up the industry. Some serious legal regulations have been introduced and even more are in the process of being legislated.

At the moment though, there is still a strong focus on products.

Many FA’s/FP’s are highly skilled and able to add serious value to your world – the art lies in distinguishing the good ones from the bad ones. If you’re looking for a breakdown of the certified designations or like to blame others for your finances, please check my article here for more info!

Financial adviser vs financial planner

The best explanation between an FA and an FP is summed up in the graphic below (with the source here).

I want to be clear – neither of these is bad – you might need a financial planner to help you with the big picture, or just a financial adviser to offer you a service that you’re looking for!

Why would I need a financial planner?

Here are some reasons to speak to a financial planner:

  • If you need to get your financial house in order – a full picture of what you might be missing, it might be a good idea to speak to a financial planner. 
  • Do you have difficulty seeing the bigger picture of the financial landscape?
  • Do you have specific questions in your financial life about how choices will affect your personal financial situation?
  • If you have a complex financial situation, such as having multiple properties, different business interests and loads of stocks, RA’s, businesses and side hustles and other interests, it would make sense that you need someone to help structure these in the most tax and money efficient manner.

Why would I need a financial adviser?

Here are some reasons you might need a financial adviser:

  • If you need a specific product (e.g. dread disease cover) and need an opinion about what to look for and get a few quotes
  • If you need advice on certain aspects of your financial world, e.g. property investment 
    • Note that I actually have met financial advisors specialising in property investment!
  • If you know what you need and are happy to pay the fee to get what you need 

Conclusion

For this article, I don’t want to get involved in the blame game and how terrible some FA’s are. The fact is that:

If you don’t have the time to manage your own money.

If you don’t want to manage your money.

Then get some help to get your finances automated and products you need.

Do I believe that anyone can manage without a FA or FP? 

Well maybe. Yet, few can ask the right questions about all the different laws that govern finances and get answers without consulting someone that specialises in these fields.

I still cannot justify the percentage fee, and would much rather opt for a consultation based fee.

Happy investing!

Sources consulted