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Financial Planning Gaining Momentum in South Africa

By Alec Riddle, CFP

The financial planning profession in South Africa has come a long way over the past decade or so, but it still has a long way to go.

The Financial Planning Institute (FPI)  and the Financial Services Board (FSB) in South Africa, and Financial Planning Standards Board (FPSB) have all made great strides, but I believe that financial planners and CFP professionals need to be doing more.

The truth is that the Certified Financial Planner credential is increasingly becoming the certification of choice for companies making top level personal financial advice-related appointments in South Africa, according to Debbie Goodman-Bhyat, managing director of a leading executive headhunting firm.
If one also considers that the need for competent financial planners globally is growing at 6% per annum, there is huge demand for the qualification which far outstrips current supply. South Africa as a country has the 7th largest number of CFP professionals with more than 3,700, and this figure is growing rapidly.

So while many of South Africa’s top companies are recognising the need for suitably qualified financial planners, particularly when appointing planners, there are areas that require attention. These include recognition by fellow professional bodies, recognition by the media and recognition by the wider public.

I think we sell ourselves short as professionals, as we are required to undergo stringent criteria, including a post graduate qualification, board examination, relevant experience, abiding by a code of ethics and subscribing to on-going learning. This lends credibility to us, as professionals, in an industry where previously anyone was allowed to practice.

Thus, it is vital that we take pride in our qualification, that we take the lead and that we help to promote and support recognition for financial planning as a distinct professional practice globally. Firstly, we have to rally together as professionals in South Africa and support our parent body, the FPI, as we will never be taken seriously if only a small percentage of us are members.

Another method of gaining credibility and respect would be to associate ourselves with and work alongside well established professional bodies, such as SAICA (South African Institute of Chartered Accountants), which has 30,000 professional members. We need to illustrate  that we are professional in all that we do and that we are putting the focus on the advice process and not ‘products’, in order for other professional bodies to take us seriously.

We have many opportunities to educate our clients and the wider public, via our review meetings, presentations, publications and the media. However, one of the best ways for us, as professionals, to gain credibility and earn respect, is in the way we conduct ourselves in our day-to-day meetings as financial planners, or as financial advisers.

A financial plan is the foundation upon which a client’s goals and objectives should be built and financial plans are the foundation upon which CFP professionals should be building their practices.

A financial plan can help a client move successfully from expectation to reality, with the assistance of a professional financial planner worth his/her salt. The planner is the architect who helps turn dreams into reality, but it is vital that the planner is committed to developing an achievable plan, reviewing the plan regularly, and is passionate about helping people to achieve the desired outcomes.

I believe that most financial planners are able to develop a financial plan, just as many sporting coaches are able to develop a training programme. However, the true test is assisting the client to achieve the stated objectives and getting them to cross the abyss, in the same way a sporting coach is judged on the athlete or team’s end result.

Far too often the wrong behaviour is encouraged with high upfront fees for developing a financial plan, or worse still, simply recommending a product. I firmly believe that if we want to be perceived as professionals we need to be judged upon the outcomes and that will ensure the appropriate on-going advice and reviews. I do not know of too many professional sporting coaches who are well paid for talking a good game or writing a good programme, but they are rewarded for their results.

A financial planner should help his/her client to develop a road map, which will ensure that the client is prepared in some way for the obstacles or opportunities that are presented along the way. Circumstances change and clients need to be guided on to how to adapt, while also ensuring a client keeps their emotions intact.

In South Africa companies often refer to their advisory team or ‘workforce’ as financial advisers, which I feel is confusing to the public. In some instances a ‘financial adviser’ could be let loose on an unsuspecting public after a couple of months of training and could do more harm than good.

A financial adviser, by the nature of the name, would imply focussing on investments, guiding you on how best to invest your funds. Very often the investment advice is based upon limited information, while we know from experience and research that it is far better to base investment decisions upon strong fundamentals, which requires a plan to be developed.

Financial advisers may also base much of their advice on risk profiling, whereby a client is bracketed as a conservative or aggressive investor, based upon their perceptions and prior experiences. As the majority of the public have never been exposed to financial education, their perceptions are based upon what they read (invariably negative news as this is what the media focus upon) and what their family and friends have experienced.

Personally I believe a team approach would be best for the client, where a financial planner builds an appropriate plan for the client and identifies the client’s personal investment benchmark. Thereafter, the financial planner should enlist the support of professional financial advisers and this could be done in the form of a strategic alliance. This would imply that the financial planner relies on the ‘investment advisory team’ to conduct due diligence on fund managers, appoint and monitor their performances relative to their mandate and benchmark and assist with the reporting.

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