By: Tony van Niekerk, Editor, COVER

I do not often comment on industry developments myself, preferring to publish the opinions of those professionals who are on the ground, advising clients and growing a financially secure South Africa.

However, the comments attributed to the Ombud for Financial Services (Fais) Adv John Simpson, as quoted in a recent news article, prompted me to not only evaluate the statements themselves, but the broader undertone signalled by them.

He is quoted as saying: “clients should not trust their financial adviser absolutely” and that they “should consider the advice of their financial service providers (FSPs) or financial advisors in much the same way they consider the advice of a used car salesman when buying a car”. Having been in the information sharing and education environment for decades, the addition of the word "absolutely" has no effect on the words preceding them. It can simply be useful in a legal environment.

He is also quoted to say: “ some investment and insurance products can be complicated, but consumers must try to find out some basic information about them, such as what they do, how they work, and who they are appropriate for”. He mentions that “The Internet is a massive resource. You can check just about anything and get more information on just about anything – investments, short-term insurance, long-term insurance”.  

Personally, I am not an FSP any more, having changed careers two decades ago. However, even as someone who was an FSP and a CFP that long ago, I had a law degree, a post graduate diploma in financial planning, an MBA and I wrote the CFP Board exam. All CFP’s today have at minimum a post graduate diploma in financial planning, with large numbers being CAs or having graduated with law degrees, B Comm degrees etc.

Once you are legally operating as a financial adviser, under a registered FSP licence, you would already have done comprehensive training, you are working under supervision, you are assisted by a Compliance Officer, and a Key Individual will be adding a further check and balance.

To compare this to a used car salesman, with all due respect to those in that industry, is not only irresponsible but, in my opinion, insulting to qualified financial planning professionals.

Referring to the internet as a source to test financial advice and the appropriateness of products, is the worst advice one can give consumers. This is exactly where the scamsters referred to by The Ombudsman, ply their trade. The internet is awash with get rich quick schemes, fancy new investment products and “knowledgable” people, ready to lure consumers into another property syndication.

The industry is spending millions on behavioural science research and is sharing these insights not only in the development of products, but also in training of financial advisers with whom they have relationship. This is done exactly because we are all susceptible to the lure of a quick win or an “easy” solution to our financial challenges.

Hundreds of professional advisers dedicate many hours, on a pro bono basis, to educate consumers, the FPI have programmes where advisers offer free time to assist consumers and the industry spend millions on campaigns informing clients of the benefits of using professional advisers. These efforts are easily undermined when consumers read or hear the advice of important financial bodies that they should not trust financial advisers.

I respectfully suggest that a much more effective approach would be to advise clients to search the internet for a professionally qualified financial adviser, registered FSP and member of a professional body such as the Financial Planning Institute, the Fiduciary Institute of South Africa or other appropriate body. These members are held to very high standards, have to meet professional development standards, and are submitted to mandatory ethics programmes.

Consumers can then verify these credentials with the Regulator and with the FPI/ FISA etc, and search the internet for further information or reviews specific to that financial adviser.

Dealing with a professional financial adviser has been proven to be the best course of action for all consumers. It has also been proven to have the best long term outcomes when it comes to investments.

The troubling question that lingers in my mind is whether the regulatory bodies and various ombud schemes themselves see financial advisers as untrustworthy operators, needing even the average consumer to consider rather using the internet to verify whether they are getting a good deal or not?

Has the financial industry failed in informing them effectively or have the Regulators not created an effective oversight mechanism to give consumers the confidence that, if they are dealing with a registered FSP, and member of a professional body approved by the Regulators, they do not have to also search the internet to check the appropriateness of the advice and products these heavily regulated advisers have offered them?