Financial Planning

A single professional financial advisor is the future of financial planning

Traditionally, financial advice has been driven by the value of the transaction that each broker might be selling. Whether that particular product made sense within the broader context of the clients’ life, overall financial obligations or long-term financial plans was irrelevant. Yet, if every individual had a single professional financial advisor with a long-term holistic view of each client and their families’ goals and plans, the selection and value of financial services purchased might be very different.

The best financial choices involve mixing and matching different investment, retirement and risk protection approaches over time as the lifestyle, income, assets, needs and responsibilities of a person change. Since getting this right as an individual is a big ask, no matter how many brokers are consulted. The future is likely to see the advent of the professional financial advisor, appointed and consulted for life, rather like GPs today.

People develop a long-term relationship with their GP who, over a lifetime, treats them for countless conditions as and when they arise. More significantly, however, GPs are able to develop a holistic understanding of their patients health needs over time, enabling them to guide patients on more serious medical conditions by sending them to specialists and other professionals as needs arise.

So, as Alexander Forbes and other major institutions work with brokers and government to professionalise the financial advice industry, they are also working to educate consumers on the need to centralise advice – even as clients diversify their investment, retirement planning and risk protection along with the management of their discretionary spend.

Certainly, the difference between once-off transaction-driven advice and the advice provided by a lifelong financial advisor with a comprehensive view of a clients’ situation, needs and goals is often startling; for example, a life broker might do his sums and correctly determine that you need to purchase four million rand life cover. Similarly, an investment broker might identify that you need to be investing 25% of your salary to achieve an income of ten thousand rand a month at retirement. Both would be providing correct advice from the perspective of their particular disciplines. Yet, if you had a professional financial advisor intimately familiar with you and your family’s circumstances over many years, he or she might advise you to take a higher excess on a risk policy thereby reducing the premium and saving  money for retirement or the purchase of more life cover, depending on which was more appropriate to your life stage.

Appointing and developing a lifelong relationship with a single professional financial advisor does not mean a one-stop-shop.  In future, as GPs do today, professional financial advisors will refer clients to specialists as and when necessary.  Should, for example, professional financial advisors be unable to provide for a certain need or a certain product themselves, they will have the knowledge to guide the client to the right specialist. Moreover, they will be able to oversee the transaction in the best interests of their client since only they will be informed by a comprehensive knowledge of the client’s financial position, needs and goals.

At the moment, however, the product- and event-driven way in which the financial services industry markets itself contributes to the schizophrenic view that consumers have of what financial wellbeing means. Certainly, the random purchasing of products that results represents a very poor use of limited resources. If we are to succeed in professionalising this industry, we need to develop financial advisors who understand how to maximize scarce resources variably over time while protecting assets and ensuring a decent lifestyle.”

In getting this right, it is inconceivable that additional advisors and professionals will not need to be consulted from time to time, or that clients may be encouraged to take on more risk at appropriate times in their lives. The difference in the future is that it will all be managed by a single professional advisor with a holistic view of the client’s lifestyle needs, financial capacity, assets and long-term goals.

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