Is today’s financial adviser dodging responsibility?

The ‘good old days’ saw the trusted life assurance salesman flip out the good ole rate book, calculate the cover that the client could afford and the deal was done. Medicals were few and far between, as the modern-age dreaded diseases and lifestyle-associ

Not so today. The life assurance salesman is no more. Instead, we have – or, ideally, are supposed to have – highly competent, accredited and qualified financial advisers, or financial planners. With the title comes responsibility that few would have thought possible way back when.

Today, a financial planner is expected to not sell policies, but to approach the financial planning situation holistically and in terms of the various legislative enactments that protect both the adviser as well as the client. The so-called six-step approach has been tried and tested, and proves that the profession is now one which must command respect.

However, as is said, respect must be earned. What, exactly, can you expect from your financial adviser?

My feeling is that too little is being done to ensure a lifelong relationship of trust between planner and client. The fact that the requisite academic qualifications and associated affiliations are in place, is a given. Mind you, achieving the latter is no mean feat and it may take a considerable number of years to reach the optimum level of both qualification as well as experience. It is for these reasons – in order to ensure most appropriate advice is given to the (prospective) client – that legislation ensures initial supervisory periods during which the ‘rookie’ acquires the requisite knowledge to ultimately ‘go it alone’. For this reason, if no other, ensure that your financial planner is either fully accredited or is accompanied by someone who is.

But I digress.

Today, your planner should be doing at least the following:

• Regularly reviewing your investment portfolio:
  • this requires an above-average investment knowledge, and warrants constant communication regarding investment performance
  • annual investment review is not an option – if you’re investing through a financial adviser, wouldn’t you want to know whether your money is doing better than at the bank?
• Reviewing your risk cover at least annually but, more importantly, each time your lifestyle requirements change:
  • on the birth of a child
  • marriage, divorce, death of a loved one
  • new car, new home, new job / career
  • disability and sickness
  • emigration
  • retirement
  • re-location
  • reduction of debt
  • ‘empty nest’ syndrome
• The above list is not exhaustive, but the astute financial adviser should generally, for example, be reducing your life cover when your bond decreases, when the kids’ education has been completed, when the children leave home and become financially independent, and when a significant other dies; it is irresponsible to merely allow cover to increase with the annual inflationary increases without a review taking place – this may well result in there being an over-abundance of cover at retirement with too little in the kitty to afford those retirement years.
• Similarly, one can have too much disability cover! Especially if you are on a group fund with risk benefits and you have a separate policy with disability and / or income cover. Ensure that your financial adviser includes this analysis on review. And, as a matter of interest, ensure that the disability cover will be paid in the event of a claim: as an example, a working mother who subsequently takes maternity leave and then becomes disabled while still on leave, may not be paid on claim, dependent on the type of cover she has – check this thoroughly with your planner, and additionally ask whether cover ceases at a particular age, or continues past retirement.
• Nowadays, products are extremely adaptable and can be changed without being replaced. Latter has been the scourge of ‘churners’ over the past decade and you need to carefully question whether a new policy is required, or whether it can merely be adapted to your changing needs, specifically because some products today reward you for keeping them in force and a replacement begins the time period all over again!
• Ensuring that your risk benefits are non-accelerated i.e. a claim on one benefit does not affect the cover on another benefit, and is something that was not available last century! If you can afford this benefit, rather ensure that your policy is amended accordingly.

Unquestionably, for me, the two key components of a truly professional adviser lie in the fact that he /she

• Communicates regularly with you
  • electronically
  • telephonically, and
  • personally
• Educates you on an ongoing basis as to the quality of the risk and investment portfolio you have, relative to your needs and affordability.

Sadly, I don’t think that every financial adviser is equipped to provide the above. It’s not an easy task, but you – the client – must demand this in the same way you demand total competence from your doctor, dentist, accountant, pharmacist and lawyer. You’d be somewhat miffed if that new home you built developed cracks after two months, wouldn’t you? Same with the financial adviser.

Are you satisfied that your adviser is looking after your needs first?