Eight questions you should be asking your financial planner

Mismanagement of money can be devastating to your current financial status and your future. Financial advisors offer investors a holistic approach to their money matters that will see long-term financial stability with return on investment.

However, seeking out the assistance of a financial planner to manage your wealth can be a daunting task. When it comes to making money decisions, working with a credible professional that you can trust should be top of mind:

**Here are eight questions you should be asking your financial planner:**

1. **What qualifications and experience do you have?**

You always want to deal with an advisor that is Certified Financial Planner (CFP certified). Why? Because they have completed rigorous training in all aspects of the industry and have written a Board Exam equivalent to the Charted Accountant (CA) exam. These advisors would have had training in investment management, estate planning, tax planning etc. It is worth your while finding such a qualified and experienced professional.

2. **How do I pay you for your services?**

This is an important question because an advisor that is charging upfront or ongoing commission or both will be charging a fee on your investments. You will want to check that the fee being charged is within the legal limitations of the law and also ensure your investments are going to legitimate funds. It is imperative to be aware of any costs that may affect your returns. An Independent Financial Advisor (IFA) should properly disclose his/her value add with the fees taken.

A good IFA will usually have a standard rate. Paying a higher fee for a good adviser will likely result in a return that makes up for fees by far. If you start losing wealth and have to fix portfolios, it can be costly and time consuming. Inflation should be properly explained so that conservative investors understand the risk of cash.

3. **What strategy input can you provide?**

An experienced IFA will do proper scenario planning and take you on a journey into the future so that you have full understanding of the possible returns and risks. Execution without strategy is futile. A professional and experienced advisor should include these prospective scenarios in their proposals.

4. **What factors will you consider when allocating money to funds?**

*Age:* It is a fact that the longer you remain in the market, the less your investment risk. Its not only about age, but more on how long you plan to stay invested. Missing only a few days over a 10 year investment term in the market, reduces your yield significantly.

*Risk tolerance:* What do clients perceive as risk? Is it loss of capital, loss of yield, not keeping up with inflation? Many factors differ in determining a clients` risk of investment. Therefore your advisor will take considerations of your entire wealth portfolio, including money or assets that they do not manage.

*Your personal goals:* This is personal to each investor and factors mostly revolve around maintaining a desired lifestyle and the standard of retirement one wants to enjoy. It is not always possible to have both. If you dont save enough to fund your goals, disappointment is on the horizon. This is where the real risk shows itself; investors may take chances on equities, cryptocurrencies, properties, business investment etc. to try and fund the shortfall.

5. **What do fees and inflation do to my investment decisions?**

Inflation is not always the Government quoted number to investors. Most investors who pay school fees, buy meat, drive a car, own a property etc. will have an inflation rate of closer to 10%. This means that your money loses value every year at a rate of 10%. Add investment fees of 3% per annum for example, then you need to have a net return of 13% pa to make sure your yield is sufficient.

6. **What does asset allocation mean?**

Clients can only fully understand risk, if they understand asset allocation. Simply put, it is the investment split with relation to equity, cash, and bonds.

7. **Where will my money be held when I invest?**

Your money is either held in a fixed investment product with tax benefits with an insurance and/or investment company OR on a direct investment platform. It is advisable to consider Trusts in this regard to plan for Estate Duty and Income Tax.

8. **What happens to my investments if I pass away?**

From an asset transfer point of view you will either nominate a beneficiary or if the investment was done in Trust, the beneficiary of the Trust becomes the new owner. Depending on the investors` choice and instruction the asset as it stands will transfer to the beneficiary. If you do not have a beneficiary nominated, your asset will revert to your estate and be subject to estate duty.