Opinion on financial planners.

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Jozsef Borbely

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Hi all,

Have you used a financial planner before? What was your experience regarding using them. Did they help? Were they professional? Whatever you feel was note worthy of your experience.

If you haven't consulted a financial planner before, I'd like to know why. Do you just find that you don't need them, Are you scared to speak to a stranger regarding your finances?

I am a CFP (Certified Financial Planner) and would really appreciate it if everyone could share their views on financial planners.

I hope to learn from this discussion to improve my own skills in the area.

Thank you in advance.
 
First of all, with lots of people financial planners/advisors and brokers (many see them as the same) have a real bad rap due to practises by big life assurers (obscene incentive schemes for representatives, life RAs with big penalties, glorified future projections on investments during sales) and scams (Sharemax, leatherguard and what not), but I am sure you know this.

Saw a free CFP from the companies pension plan company, I would not have paid for one . My retirement and other investments were more than adequate and properly diversified and all that (self taught :cool:). While I had retrenchment cover and big lumpsum in group risk cover he identified a need for monthly disability income protection. So yes, there was value in seeing him but only slight in my case.
 
supersunbird said:
First of all, with lots of people financial planners/advisors and brokers (many see them as the same) have a real bad rap due to practises by big life assurers (obscene incentive schemes for representatives, life RAs with big penalties, glorified future projections on investments during sales) and scams (Sharemax, leatherguard and what not), but I am sure you know this.

Saw a free CFP from the companies pension plan company, I would not have paid for one . My retirement and other investments were more than adequate and properly diversified and all that (self taught :cool:). While I had retrenchment cover and big lumpsum in group risk cover he identified a need for monthly disability income protection. So yes, there was value in seeing him but only slight in my case.
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Thank you for the response.

Yes old style retirement annuities and brokers that had no qualifications have given the financial planning industry a bad name. On top of that you have agency brokers that have to meet targets to keep food on the table so they are "forced" to sell, sell, sell.

Trying to break away from this stigma will be extremely difficult. In my 5 years of experience I have learnt that as long as you do whats best for the client the business will follow, even if that means you don't do any business at all with that client. So referrals are key, and to get referrals you have to provide great service.

Working as a independent financial adviser is another important aspect to look for in my opinion. They can shop around in the market for the best product for that client in that situation. In other words you aren't forced to focus on one companies product range.

Also when you say "saw a free CFP' I have to point something out. Very few advisers charge for a consultation. They only get paid if you do business with them. The problem is the average man on the street doesn't know if they are getting value for money.
 
seanyp00h said:
My general consensus with FP's that they don't care about you, only about themselves.
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I would love to know what I could do to change your outlook on financial planners. The process I am following to change people's perspective is to give away my knowledge on financial planning through articles on my website and most importantly use YouTube videos to explain difficult concepts.

I believe if I show people/clients why they need financial planning (even if its not done by me) the sooner they will act to help themselves.
 
Don’t have great experience with FP’s either, they promote products that make the most for them. I have and always will, if needed again, use a FP that charges a consultation fee and not commission.
 
I used a FP when I was young and naive.
He sold me Discovery life insurance, and the next year a Discovery RA.
I didn't buy anymore of his products and I therefore don't see him anymore.
He still pockets commission for his sale, and this is 8 years later.

I also had a Liberty RA bought through an advisor, but did a Section 14 transfer to Coronation in March this year, and paid a 25% penalty.
In the long run this move will prove to be a good one, no penalties and no more commission for these thieves!!!

I plan to do a Section 14 on my Discovery RA soon, and be free of FP's for good.

There are Good FP's out there, but not many, most are just after quick bucks and don't put the clients interests first.
The other problem for FP's is that people are a lot more informed nowdays, they have mountains of info available at the click of a mouse, and people realize that they need not use a FP to buy investments, they can go direct.

Back in the day everyone used tax consultants to do their taxes, until e-filing arrived, their easy money has dried up.
And the same goes for FP's, only the good ones who actually provide good service and value will survive, the gravy train has passed :)
 
I've got a hardcore financial background so I generally just wing it.

On the whole I'm mistrustful of structured products - and if the person is selling branded products from one company I'd likely tell them to get lost straight away. I prefer actual equity - sure its more risky but I feel better equipped to counter that risk. e.g. With a share investment I can do a DCF analysis...with structured products I'm at the mercy of a (lying?) salesperson with an incentive to deceive me. I'll take my chances on the stock market...

I'm still young so winging it is still feasible. Failing that I'd go for index trackers later on in life. If I need something more conservative still...likely some Investec product - they have played fair with me in the past.

Since OP is a CFP - in general they are / are perceived to be shysters...but if one finds a good one he/she is likely to be worth their weight in gold. Esp if big money is involved.
 
I used a FP when I was young and naive.
He sold me Discovery life insurance, and the next year a Discovery RA.
I didn't buy anymore of his products and I therefore don't see him anymore.
He still pockets commission for his sale, and this is 8 years later.
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Ya, it was like the wild west. You have the good, the bad and the ugly.

I also had a Liberty RA bought through an advisor, but did a Section 14 transfer to Coronation in March this year, and paid a 25% penalty.
In the long run this move will prove to be a good one, no penalties and no more commission for these thieves!!!
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You get 2 kinds of RA's the old style RA's that is sold off of a life license and thus it comes with penalties and life commission. The new style RA's allow you to stop contributions when ever you want. The fee's are transparent and normally lower, and advisors receive commission based on a percentage, in my case 0.5% on annual basis. Its in there interest to get you the best return since their fee is calculated off of the growth investment.

Something you might not know is that South Africa is going the route of the UK. A financial planner needs to see you at least once a year in order for you to sign off that he receives his ongoing commission. If you arent happy with his service you can just refuse to sign the required form.

Its a pain for advisers that actually provide a good service but i can see why its necessary.

I plan to do a Section 14 on my Discovery RA soon, and be free of FP's for good.
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Unfortunately you were free from his after 2 years. With old life style RA's his commission was paid upfront. Thats probably why you never heard from him again was because there was no financial incentive from his to see you. Sad but true.

There are Good FP's out there, but not many, most are just after quick bucks and don't put the clients interests first.
The other problem for FP's is that people are a lot more informed nowadays, they have mountains of info available at the click of a mouse, and people realize that they need not use a FP to buy investments, they can go direct.
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To be frank I like the fact that clients are more informed. I even do my best to give my knowledge to my clients in away they can use to indentify there own needs. I do this mostly through my website www.financespotlight.co.za. I post articles on important aspects of financial planning but what really adds value are the YouTube videos I believe. I would appreciate feedback on those on how to improve them.

Back in the day everyone used tax consultants to do their taxes, until e-filing arrived, their easy money has dried up.
And the same goes for FP's, only the good ones who actually provide good service and value will survive, the gravy train has passed
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Must confess this was before my time. Tax returns is not my area of expertise only investments and insurance.

Thanks for the feedback. I see i have a long way to go to show people the industry is slowly changing and become more professionalized.
 
@Jozsef, I must say I'm impressed that you came here asking opinions, as most are negative against FP's.
You have not gotten nasty with our views, and you have not pushed yours onto us.

Can you provide us with more info on your background? Like how long you've been a CFP, what your area of speciality (life, retirement, investments) ?
 
@Hendrix, Thank you very much for the compliment!

I focus on investments (savings & retirement) and long term insurance (life cover, Income disability, capital disability & critical illness),Ii also do estate planning as it ties into the other two. I don't do medical aid and short term insurance, but at the independent brokerage I practice at we have specialists.

If you would like to know more about me you can visit my website and check out the "about me" tab. www.financespotlight.co.za
 
I get need for financial planning, but somehow I don't feel CFPs are fulfilling that need. Mostly they seem do be just peddling some product under a thin guise of customization for the clients needs. Proper financial planning in my mind would be more like going over the clients cashflows & budgets with him/her and identifying whether its sustainable in the long run.

NOte - none of this is directed at you Jozef. For all I know you might be the best CFP in the country. Its more a case of me being puzzled by the entire industry.

Jozsef Borbely said:
YouTube videos I believe. I would appreciate feedback on those on how to improve them.
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The one I checked seemed decent enough. I'd be concerned about copyright infringement though - I'm gonna take a wild guess and say at least some of the music graphs etc is copyrighted. Probably not a major risk, but def something to consider.
 
What is the purpose of the annual fee. i.e. What service is rendered in return? From talking to friends in the business I know the commission structures tend to favor new sales, so I doubt there is any incentive to spend time on a customer who is already committed.

I get need for financial planning, but somehow I don't feel CFPs are fulfilling that need. Mostly they seem do be just peddling some product under a thin guise of customization for the clients needs. Proper financial planning in my mind would be more like going over the clients cashflows & budgets with him/her and identifying whether its sustainable in the long run.
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To begin to justify the annual fee I would have to go through the process with you, which I would love to. The process is more about analyzing the clients current situation through a tool we developed call a Financial Needs Analysis. So for example part of the tool is a retirement forecaster, which takes you current assets and projects how they will grow over time, till retirement. So say the tool says you should be able to take R15000 a month in present value terms but you actually need R20000. Now we reach that target by doing a few things, adjusting you investment profile, increasing your monthly contribution, adjusting you lifestyle, etc etc. Now because the market is not very nice with us we have to review this ATLEAST every year to make sure we are still on target. This is one part of a ongoing service a financial planner "should" provide to justify the ongoing fee.

NOte - none of this is directed at you Jozef. For all I know you might be the best CFP in the country. Its more a case of me being puzzled by the entire industry.
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Thanks, I'm feeling a bit under the spotlight here, but I wanted to see what people thought and Im glad that I am getting honest feedback.

The one I checked seemed decent enough. I'd be concerned about copyright infringement though - I'm gonna take a wild guess and say at least some of the music graphs etc is copyrighted. Probably not a major risk, but def something to consider.
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Ya I realizing this more and more. Its not easy making these videos especially if marketing or what ever area of expertise this fulls under. Its just my trail and error to get the knowledge out there. But I do seriously have to look at changing some aspects of it. Have to say thou, the outro with the eye of the tiger music brings a smile to my face every time I hear it.
 
The issue I have with financial planners is that they have a fundamental conflict of interest with the way we do stuff in SA. A financial planners job in theory is to help me cover my risks and grow my retirement funds. The issue is that with the ongoing fees that are paid to financial planners they now have conflicting objectives when it comes to long term savings products. They can lower fees to help the client or hike the fees to help themselves. Its a fundamental conflict of interst and is why we have so many dodgy brokers in SA today. In a lot of first world countries they have completely done away with that type of system and financial planners are paid by the hour in a similar way to how doctors are paid. The good one's can charge more for their time while the bad one's truggle. Either way the conflict of interest is gone as with no ongoing fees the only thing they can do is give you the best advice possible to increase your growth.

Life insurance products are better in that the FP gets his commision within 2 years I think in SA and I have no issue with that. What I mind is someone getting a % of my money for decades into the future for essentially no work when they sold me an RA.

I consult financial advisors for advice on risk insurance and setting up wills but I manage my long term savings myself. I also prefer to only deal with financial planners who have no ongoing or up front fees and simply charge me by the hour. SA is heading that way and many financial planners are going that way too but strangely enough many companies providing financial products don't allow the zero fee option and insist on a % going to the FP as I understand it so SA has some way to go to reach a point where its a more mature industry.
 
Cius said:
SA is heading that way and many financial planners are going that way too but strangely enough many companies providing financial products don't allow the zero fee option and insist on a % going to the FP as I understand it so SA has some way to go to reach a point where its a more mature industry.
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Like that iTransact ETF RA... ok iTransact, we will just go 10x if wanting a index tracking RA, thanks bye!
 
supersunbird said:
Like that iTransact ETF RA... ok iTransact, we will just go 10x if wanting a index tracking RA, thanks bye!
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Sorry i am not familiar with this ETF, please elaborate. What was the point you were trying to make?

Life insurance products are better in that the FP gets his commision within 2 years I think in SA and I have no issue with that. What I mind is someone getting a % of my money for decades into the future for essentially no work when they sold me an RA.
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The commission from a R1000 pm life policy can earn a financial planner around R10000 worth of commission +/-. The commission from a R1000 pm investment at 0.5% ongoing commision would be R5. After two years some brokers approach their clients and show them they can get a cheaper policy, with the same benefits. Great for the client but those brokers ultimate objective is to get the R10000 commission again. IMO the life commission should be the same as the investment commission to avoid this churning of life policies. The intention is key here however.

They can lower fees to help the client or hike the fees to help themselves.
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I believe the value I add to my clients in terms of service and knowledge out weigh the ongoing fee charged, cant proof it here but let me use a example. A young person wants to invest, he might use a unit trusts and since he would not know where to start he might use conservative unit trusts since he is scared he might lose his money. Because he is so young and could ride out the market cycles I would recommend to increase the risk in the portfolio (e.g. increasing the allocation to equity). So for a ongoing fee of 0.5% over the long term he would have improved investment performance of between 3-5%.

This is only a example, but people don't know what they don't know. Its like when i take my car to a mechanic to get fixed. He tells me my so-and-so is broken and my whats-it needs to be replaced. I have no clue what he is talking about and am forced to trust him is his area of expertise. I suppose this is the underlining feel im getting from the comments in this post. People are scared to trust financial planners because they don't know if planner has their best interest at heart or not, and its difficult to find this fact out, like with the mechanic.
 
Jozsef Borbely said:
Sorry i am not familiar with this ETF, please elaborate. What was the point you were trying to make?
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Its new and the focus is its a ETF RA:

Look closer to the bottom for the 3 Itransact Retirement Annuity:
https://www.itransact.co.za/Pages/Gu...wer.aspx?pid=8

And from this article:
As iTransact only works through financial advisors it is important to note
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http://www.moneyweb.co.za/moneyweb-investment-insights/how-much-does-that-etf-ra-cost

So yes, I cant invest in that without using a FA, so I will ignore their product...
 
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