Financial Data
Updated 26 Feb 2020

Which comes first: Product or planning?

The role of independent advisors in taking your products to market.

Wouter Fourie, 29 April 2016  Share  0 comments  Print

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If you are in sales, you definitely know the experience of trying to retrofit your product to suit the customer’s needs. Sometimes, there is a perfect fit and they sign up, but often you have to convince the customer that their needs and your product are made for each other even if it requires you to scramble your resources to make it work after the sale. 

This is a particular concern in the world of personal finance. In this world, products are sold on commission and customers are, more often than not, uninformed about their needs and the true costs or benefits of different financial products. 

To make matters even more complex, the range of financial products in the market are simply staggering and small differences or muddled marketing jargon make product comparison difficult or near impossible. Added to that, the roles of financial advisor and the consumer have a potentially toxic mix where advisors are incentivised to sell products in a process cloaked as financial advice.

Related: Which should you choose: A broker of a financial planner?

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Here is how one market watcher, Bruce Cameron of Personal Finance, summed it up:

“Investments are critical to the lifestyles and well-being of most of us, yet too often we are content to put ourselves at the mercy of others when investing money we have spent many years accumulating.  One of the reasons for this is that the financial services industry has sown confusion with a vast array of investment products that are frequently sold indiscriminately.”

It is important to always remember that planning will always lead products not the other way around. A good advisor will even recommend that you keep your current products if it fits the financial plan.

A question you always need to ask is – Mr. Advisor how will you be paid for the advice you provide? If the answer is that he will provide it for free, you should be worried. The only way for him then to earn an income is to sell you a product that in most situations won’t be to your benefit. 

This is where the independent fee-based financial planner distinguishes themselves from the herd of product salesmen and woman. Independent means that they are subject to sales targets and are not forced to sell you just one company’s product but can advise you on a range of products – if needed. Fee-based means that they will charge a fee for advice and you as the client will know that the outcome won’t be a new product, but a financial plan. 

It is in this complex environment that the Financial Planning Institute (FPI) introduced the globally recognised CERTIFIED FINANCIAL PLANNER® certification.

It requires financial planners who want to obtain the CFP® designation to complete their rigorous financial planning certification process by completing a postgraduate qualification in financial planning (Education) and then to sit for the Professional Competency Examination (board exam) [Examination]. This combined with further relevant practical experience and mentorship programmes (Experience), similar to accountants and lawyers, will allow them to hold the CFP® designation. The CFP® designation is internationally recognised as the benchmark for professional advice.

Holders of this designation have met stringent qualification and competency requirements as well as abide by unequivocal ethical standards (Ethics). This means that not only will you have peace of mind regarding the technical accuracy of the advice but also the integrity that underpins it. 

Related: The secret of long-term investment: Making your money work for you

In comparison to the large body of sales-driven financial planners, only a handful of CFP® professionals exist. Apart from looking out for the CFP® mark when selecting a financial advisor, it is advisable to find an advisor that charges you for their advice. This may seem like a strange suggestion, but it ensures that you get independent advice that is not informed by the advisor’s ability to make a commission from your meeting and his or her subsequent “advice”. 

Ultimately, the advice you receive today may only prove its worth many years hence, when you get ready for retirement or send your kids off to university. That may be too late to take heed of that old admonition that, with free advice, you often get what you pay for.

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About the author

Wouter Fourie

Wouter Fourie is a CFP® professional and 2015 FPI Financial Planner of the Year.

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