The Value of Good Advice

Positive steps to regulate and improve the conduct and professionalism of the financial planning industry have been made over the past months and are now coming to a point where it will impact our clients. These steps have been called the Retail Distribution Review (RDR).

On the surface, RDR is looking to turn the commission-based world of financial advice on its head and render it a fee-charging service – just like any other professional service, such as that offered by an architect or a lawyer. Deeper down, it will create a level of accountability that thrives in an environment of trust and ongoing value – which is the space that a financial planner should always fill.

In an article published on Maya on Money, the General Manager of Broker Distribution at Sanlam Personal Finance, Jacques Coetzer, clarifies the situation succinctly. He explains that, as a client, “you will start to pay a fee specifically for advice services, as well as a fee for advice related to the products you eventually purchase.”

With the new systems that will be coming into place, the key is to be prepared in advance. So don’t be scared to ask questions, discuss this and find out what it will mean for you. This new system provides more options – in terms of the value you receive and how you receive it – and you will most likely be in a position to negotiate a fee structure for advice and planning services.

RDR proposes three main payment options:

  1. Retainer fee
    This can be paid on a monthly or quarterly basis and will give you the right to a review or certain services throughout the year.
  2. Advice payment
    You will only pay for advice when given and, if you decide to act on it, this can then potentially be offset against a purchase fee.
  3. Negotiated fee
    This can be paid as a once-off transaction or deduction from an investment.

Many people question the need to pay for the advice or services of a financial planner when they could invest independently. However, given the smorgasbord of investment options on the market, this could prove to be an overwhelming activity and result in costly mistakes that could easily be avoided.

Coetzer explains that knowledge and experience can’t be obtained from a website, and “qualified and accredited brokers offer a significant service to empower South Africans to take charge of their financial destiny.”

A UK study confirms his beliefs in its findings that “clients who received appropriate financial advice typically saved nearly double the amount for their retirement than those who didn’t seek advice.”

Secure your financial future by initiating discussions soon to learn about how the new regulations will affect you.

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