By: Sydney Sekese, CFP® professional and member of the Financial Planning Institute

I am adopting this month’s article from a well-known expression. This expression was in use in the middle of the 4th century BC. It is related to a fable, which goes something like this:

“A young man spends all his money on gambling and luxurious living until he has just the cloak on his back to keep off the cold weather. Seeing a swallow fly past on an unusually warm day, he concludes that spring has come and sells his cloak in order to be able to place one more bet. Not only does he lose the bet, but also the weather turns cold again. He finds the swallow frozen to death and blames it for deceiving him. In some versions the young man also dies.”

The above illustration can be accustomed to how most of us have experienced the financial implications caused by the events that started in March 2020. We could have anxiously reacted on a slight indication of positive (or negative) news around us. For example, the global and local shares on the respective stock exchanges, experienced sharp declines in the first three months of 2020. There were however equally strong recoveries for the month of April 2020 alone, and beyond. If you sold your shares pre-maturely in March, you would have missed the excellent rebound a month later.

Another example: If you invested in listed property  in January 2020, your investment would be down 33%. However, if you invested in November 2020, you would be posting at 20% capital return by the end of 2020.

Most of us do not have a crystal ball to predict the next move (or price) in the market. Without a proper financial and/or investment plan, most of us end up emotionally chasing the markets. To avoid a “knee-jerk” reaction, it is worthwhile to approach a Certified Financial Planner to assist you in scientifically compiling a financial plan. So, how do you go about choosing a credible Financial Planner?

CERTIFIED FINANCIAL PLANNER®/CFP® professionals are required to take CFP® Professional Competency Exams (known as the board exams) and then become members of the Financial Planning Institute of Southern Africa (FPI).

FPI is a South African Qualifications Authority (SAQA) recognised professional body and ensures that people who carry the CERTIFIED FINANCIAL PLANNER®/CFP® designation are qualified, experienced and that their credentials can be checked and verified by any interested persons.

Some Financial advisors often do not have the postgraduate qualification in financial planning (the pathway to CFP® certification); they however have to be registered with the Financial Sector Conduct Authority (FSCA).

A genuine financial planner with a genuine interest in your financial wellbeing will possess certain traits. He/she will demonstrate that personal financial planning is easy to understand and will ease the implementation of the plan.

There are further quality behaviours that should be considered; including the following:

  • They have a good reputation
  • They take a proactive approach
  • They don’t panic and have a clear strategy
  • They invoke confidence and trust
  • They have a holistic view of your finances
  • They have a support team
  • They work with you and never chase revenue at your expense

The financial planning profession and regulators have implemented several mechanisms to protect consumers in reducing the unscrupulous behaviours of certain individuals. It is the responsibility of the consumer to also interrogate the intended relationship with a financial planner/ advisor. CFP® professionals follow a scientific approach and this includes a six steps process as follows:

  • Step 1 – Establishing and defining the professional relationship (the first appointment)
  • Step 2 – Gathering information (including your goals, time-frame and attitude of risk).
  • Step 3 – Analysing and evaluating your financial status
  • Step 4 – Developing and presenting the financial recommendations
  • Step 5 – Implementing the financial planning recommendations
  • Step 6 – Monitoring the financial planning recommendations

It is clear from the above that the relationship with your chosen financial planner should be long-term in nature. It is therefore not a fool’s game to spend time in this aspect of your life.  Research shows that 37% of those working with a CFP® professional strongly agree that they are knowledgeable about financial matters; compared to 29% of those working with any financial professional and 25% among those not working with a professional.

Final thoughts:

These are unusually and uncertain times we are experiencing. Instead of relying on a brief sight of a swallow, or a hunch; a properly constructed financial and/or investment plan can be a useful navigating tool to reach your goals .

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