Getting advice from social media, blogs, the radio, podcasts, press and other sources – is it in your best interest?
Who can give advice on financial products and who can’t?
Who Can and Who Cannot Give Advice?
The reality is that anyone can provide advice, however to provide financial advice that is linked to a financial product you need to be a licenced Financial services provider(FSP) in south Africa. You need to register with the Financial Sector Conduct Authority (FSCA), previously known as the Financial Services Board (FSB) for the appropriate licence categories in order to provide advice, such as life insurance, car and home insurance, unit trusts, retirement funds and medical aid.
As a consumer you have the responsibility to ensure that when someone does provide you with advice with regards to a financial product that they are licenced. You can verify this on the FSCA’s website.
A registered advisor has to meet certain criteria to ensure that they are fit and proper to be able to advise you on your financial matters. Advisors has to maintain their level of skills and knowledge by completing up to 18 hours of continuous professional development (CPD) every single year. CPD should however, just be the minimum you expect from your advisor.
I think we also need to note that there is a difference between advice and information. Information is static that is applicable to everyone, advice is when that information is turned into guidance to help you make a decision on a specific product.
What Are My Rights When I Get Advice?
You have the right to receive advice from an advisor who has applied due skill and diligence, non-biased and in your best interest. An advisor needs to ensure that he makes the proper disclosures to you in terms of the services they offer, the fees they get charge, the companies they represent and disclose any possible conflicts of interest.
When the advice you have received is not in your best interest, or incorrect, and it was provided by a licenced FSP, you have a rights for recourse.
You will need to exhaust the complaints process with the FSP first before you will be able to lodge the complaint with the FAIS Ombud. You do also have the right to make a civil case against the advisor, but that could lead to exorbitant legal fees where as the services of the Ombud is free for consumers.
What Are My Rights If I Take Advice From Someone Not Licenced To Give Advice?
Again, you do have the option to make a civil case, however the burden of proof that the advice you received was improper and make a compelling case as to why you did not make use of a registered advisor. With any right comes a responsibility and if you knew that you had to obtain advice from someone who is registered, you have a responsibility that you need to verify that registration.
How Can People Who Write For Newspapers, Blogs etc Give Advice Without Being Part of the Regulator?
Because this is not direct advice, it is your choice to act on it. The advice provided here is general in nature. Sometimes this advice is irrational or applicable to only a few people of the community.
You need to take the decision on whether you act or not on your own accord. Most of the times, these articles contains disclaimers that says you should contact your financial advisor. This type of “advice” is generally referred to as Information and not advice as discussed above.
What Else Should You Know?
Advisors can have many designations, qualifications etc, which is great, you need to find someone that is consistent. I am hesitant to use the word trust, as this is a very loose term used, and some advisors have a very bold personality making them seem trustworthy. However, someone who acts with consistency, willingness to answer your questions, and be approachable are key.
A caring advisor will not talk about product in your first meeting, unless it is the reason you have approached them.
A good advisor, will want to be your partner for decades to come, through ongoing advice and planning. Not just a once off sale.
You are an adult, do your own due diligence, ask lots of questions and get a second or even third opinion. It is your money and your future, after all.