Article by Ntokozo Khumalo
Publication: 5 September 2019, Sowentan Live
Interview with Hardi Swart, CFP®, Financial Planner of the year 2019
Change your life by putting your financial adviser on speed dial
Your decision to invest should be based on your circumstances, risk appetite, objectives and investment horizon, and a friend or family member cannot help you with this.
Six out of 10 people in South Africa turn to their family and friends for financial advice, especially if they seem to be doing well for themselves.
But this perceived financial wellbeing can lead you to make costly mistakes, like an investor found out after she invested in suspected Ponzi scheme Coin It Trading on the advice of a family friend.
The investor, who does not want to be named, told Money last week she invested R140,000 in Coin It last year after a family friend told her he resigned as a policeman because of the profit he was making. Coin It promises investors up to 200% return on investment over three years. The monthly payments promised were between R15,000 and R30,000.
But now with the investors reporting that they haven’t been paid and the Financial Sector Conduct Authority and the Reserve Bank investigating, she doubts whether she’ll see any of her money again.
“While our social circles may mean well, taking investment advice from someone who is not qualified to offer it could lead you down the wrong path and to potentially bad investment outcomes,” Lettie Mzwinila, business development manager at Allan Gray, explains.
Mzwinila says your decision to invest should be based on your circumstances, your appetite for and tolerance of risk, your objectives, and your investment horizon (the length of time you expect to hold the investment). A friend or family member cannot do this for you.
“Your social circle may suggest an investment based solely on potential returns, without considering your needs, and this could impact your investment success,” Mzwinila adds.
Gerald Mwandiambira, acting chief executive at the South Africa Savings Institute, says many people question the need to pay for financial planning advice. However, navigating the market on your own given the number of options available can prove to be overwhelming and could easily result in you making costly mistakes.
“With the guidance and assistance of a professional financial adviser you can easily avoid this,” Mwandiambira advises.
The experts agree that a friend or family member is likely to recommend the latest hot tip, but you need a diversified portfolio that is most likely to meet your need for a particular return without taking too much risk.
Mzwinila says for you to be a successful investor you must be disciplined and learn to ignore the noise. She advises you:
Establish the facts: When it’s your money on the line, don’t assume that your friends have done the research. Carefully investigate the investment to determine whether it is appropriate for your needs.
Consider the motivation for the advice: Before diving in head first, ask all the right questions: How much must you invest, is the promised returns unrealistic, is it a pay-first opportunity, etc?
Consider the worst-case scenario: What if you lose some or all your money? Can you afford to take the risk? Considering the worst-case scenario will help you make a more considered investment decision.
Remain on course: Instead of listening to different advice from different people, stick to your plan to make your money grow. Ensure that your plan is clear and stay the course.
Seek good independent advice: You stand to lose more when pursuing free tips from someone who is not qualified to give financial advice. A good financial adviser can help you manage your behaviour while you are invested to improve your investment outcomes.
We tend to overvalue advice from trusted friends and family because we believe they are acting in our best interest.
Award-winning financial planner Hardi Swart
Hardi Swart, the winner of the Financial Planning Institute’s Financial Planner of the Year Award and MD at Autus Private Clients, says friends and family often give each other all sorts of advice, and often they don’t even realize that they are giving advice about financing a car or buying clothes and other goods on credit and investments without properly understanding your circumstances and the risks of the recommended investment.
Swart says we tend to overvalue advice from trusted friends and family because we believe they are acting in our best interest and don’t want to hurt their feelings.
But, he says, there is a big risk in taking advice from someone who does not have the qualifications or experience to give you proper advice and it could have disastrous implications. Everyone has their own unique circumstances and what might have worked for them is not necessarily going to work for you, he says.
Old Mutual’s latest annual Savings and Investment Monitor shows that confidence in financial decision making has deteriorated further with high numbers of people unsure where to turn for advice. The survey shows that even though 60% of consumers turn to family and friends for advice, a significant 45% would like professional advice, but find it hard to find someone they can trust.
“A key consideration in selecting an adviser is trust,” Mzwinila says.
A suitable starting point in looking for one is to ask for a recommendation from someone whose judgement you value – like family or a good friend, she says.
Swart says if you get advice from family or friends ask an adviser for a second opinion because it could save you a lot of money.
Richus Nel, Financial Adviser at PSG Wealth, says a good financial adviser will take the time to get to know you, understand your challenges, and would want to know about the highs and lows in your life.
“If you are serious about building your personal financial wealth and independence, you should engage and acknowledge that your financial adviser is your partner on this journey. Don’t underestimate the value that a trusted, trained financial professional could contribute on your journey.”
Nel says if you can’t remember your adviser’s name for any number of reasons, you should review your relationship. “Change your life by putting your financial adviser on speed dial,” Nel urges.
Hardi Swart, CFP®, is the Managing Director of Autus Private Clients and 2019/20 FPI Financial Planner of the year.