To give you an idea of what a financial planner can do for you, we asked the three finalists in this year’s Financial Planner of the Year competition about their approach to financial planning.
Personal Finance: What value do your clients receive for the fees they pay?
Shaun Latter: The aspect most valued by our clients is clarity about their financial situation and the certainty this means going forward. This peace of mind alleviates a lot of angst about wealth and retirement. We provide an exact breakdown of what a client stands to gain in the savings we can create via lower asset management costs, as well as tax.
A recent Morningstar survey found that the average client stands to benefit from a 1.5 percentage-point-higher annual return by engaging a good financial planner. The survey revealed that investment vehicle selection, asset allocation and withdrawal strategies (all central to our advice philosophy) are the key drivers of this excess return, which could result in your retirement income increasing by up to 23 percent.
How do you charge clients for your advice?
I charge a nominal flat fee for the financial plan (R8 500), after which there may be administrative costs, depending on the extent to which a client’s portfolio needs to be restructured. The fee seldom exceeds 0.6 percent of the asset value, which is highly competitive compared with commissions of three percent that intermediaries earn for selling products. Thereafter, we have an annual advice fee of one percent of the asset value, which decreases for assets over R10 million.
Do you believe your fees will pass the Treating Customers Fairly test, and if so, why?
Absolutely. Not only do all my clients benefit from the additional annual return of 1.5 percentage points, but, in most instances, they also pay about 1.5 percent to 2.5 percent less in costs and taxes than before, even after my fees are included. This means that most of our clients’ returns are 3.5 percent to four percent higher after consulting us.
We incur a small loss in the financial planning and implementation phases and this gives us an incentive to provide robust advice on an ongoing basis to receive our annual fees. The fact that what we earn is based on the client’s asset value ensures that our income increases only if our clients’ wealth is increasing.
How much time do you spend coaching clients about their finances, talking to them about themselves, their goals and their attitudes to money? How much time do you spend developing a financial plan for them?
Each client is different. I spend between four and six hours consulting with them about their personal circumstances, as well as determining their attitudes towards finances and investing. I take each client through the fundamentals of investing and how this applies to them. It is important that each client appreciates and understands the why, the where and the how of their wealth strategy.
A further six to eight hours is spent doing the financial analysis and investment modelling. Detail is key and, although no strategy will be perfect, our aim is to give each of our clients the best possible chance of achieving their goals.
Most of the coaching and guidance comes in once an investment strategy has been implemented, to ensure that our clients’ emotions don’t cloud their judgment and force them into costly mistakes. Although potentially the most challenging aspect of my role, I deem it to be the most important and rewarding aspect of what I do.
How many clients do you personally look after?
I look after 56 clients and focus on quality as opposed to quantity.
Who is your ideal client?
The clients that benefit most from working with me have investible assets of R5 million or more and are generally 10 to15 years from retirement (although many don’t intend fully retiring). We have a minimum of R2 million in investible assets to ensure we can remain true to our service promise of personal attention and taking great care of a smaller number of clients.
What activities are you participating in for Financial Planning Week?
I will offer free consultations at my Johannesburg and Umhlanga offices.
CV
Qualifications: Diploma in Business Management from the University of South Africa; Postgraduate Diploma in Financial Planning from the University of the Free State; Advanced Postgraduate Diploma in Financial Planning specialising in estate planning and asset types and investment instruments; Certified Life Coach with the International Coaching Federation.
Previous jobs: Old Mutual as a business consultant and then market manager for the banking segment; Acsis financial planning coach.
Other: Hosts Your Money Matters on CNBC Africa; was vice-chairperson of the Financial Planning Institute’s client engagement industry sector group. Finalist in the Financial Planner of the Year competition in 2011 and 2012.