Many investors lack the time, knowledge and experience to invest successfully, often encountering difficulties that could have been avoided had they taken advice from an Independent Financial Adviser (IFA) at the outset and continued to listen to their counsel over time. Independent financial advisors play an important role in helping you make decisions that are right for your circumstances and in assisting you to avoid the pitfalls of investing on your own.
The critical starting point for achieving financial freedom is a well-crafted financial plan documenting your financial goals and assisting you to make informed decisions that suit your unique circumstances. An adviser will help you to figure out the complexities of your financial situation, identify potential gaps and help formalise your plan based on your attitude towards risk, your time frame for results and your personal priorities. Your adviser will review your situation regularly and revise your plan as necessary so that you can stay on track to meet your goals. For example, if you have been retrenched or are changing jobs or are retiring, an adviser can help you to make sure that you preserve your retirement savings so that you will have enough money to live on.
You can also rely on your adviser to stay abreast of investment trends and changes in regulations, tax and product offerings. The choice of products and funds available is mind-boggling. Different products have different tax structures, while different funds have different objectives.
An adviser can help you to be rational rather than emotional about your investments encouraging you to avoid switching between investments for the wrong reasons during volatile times or destroying the value of your savings by selling your investments at the wrong time. An adviser will ensure that a disciplined savings and investment process is implemented and maintained, thus eliminating any tendency to procrastinate and allowing you to gain valuable time in the market. Inflation erodes the value of your money and the returns of your investment should be at least enough to compensate you for the length of time that you invest so that the value of your money is maintained.
Important considerations when selecting an adviser:
You need a good relationship with your adviser founded on trust and you need to know that he/she is honest, values your business and has your best interests at heart. Your adviser must be licensed by the Financial Services Board(FSB) having passed regulatory exams and fulfilled the Fit and Proper requirements, as well as proving to the FSB on an ongoing basis that they are developing and maintaining their professional competence. Ensure that your adviser has the necessary academic credentials.
The best advice is independent advice. A proper Independent Financial Adviser is not incentivised to advise on some products over others or employed by product providers to sell their products. An IFA is not restricted to selling the products of any one company and will remain objective and choose the products that are best suited to you. Disclosure and transparency are crucial – make sure that your adviser explains to you upfront what fees you will pay and how they will work.
One of the keys to successful investing is diversification. In other words, do not have all your eggs in one basket. For example, in addition to South African investments, including offshore investments in your portfolio can help your savings grow, while lowering your risk. An adviser can help you to make sure your investments are adequately diversified.
Adapted from article by Jeanette Marais of Allan Gray
At SIRIUS FINANCIAL NAVIGATION, Phil and Chantal offer good, independent investment advice.