When you are looking for a partner to manage your financial affairs, choosing the right financial advisor and advisory practice is an important decision. You will probably partner with them for life, so you need to ensure that you find the right person - a professional, credible, and reliable financial advisor with a history and solid track record, whose experience will strengthen your financial position. 

To help guide investors in selecting the best financial advisor for their requirements, we have put together a checklist of essential questions that you should ask when you first approach a potential advisor. Fees will always be important, but some critical boxes need to be checked before remuneration is even mentioned. If the advisor does not answer these questions immediately at any point in the interview, it should raise red flags that they may not be the right fit for you.

1. What is your FSP number?

Ensuring that the financial advisor is legitimate is as simple as confirming their practice is licenced as a Financial Services Provider (FSP). An FSP number indicates that the firm meets the stringent requirements set out by the market regulator, the Financial Sector Conduct Authority (FSCA). It authenticates their experience, qualifications, ethics, and operational ability and that the practice is licensed to provide financial advice and service. Their licence number will be listed on their website, corporate brochures, letterheads, and other marketing material. If you still want to check that the advisor’s practice is registered, you can do so on the FSCA website or click here.

2. What are your qualifications?

When you hand over the management of your finances, it is critical that you are advised by a professional. In South Africa, anyone with a matric certificate who has completed an RE5 qualification may use the title, financial advisor. There is a wide gap though, between this type of advisor and the cream of the crop - a qualified Certified Financial Planner® (CFP®). This is a professional who holds a postgraduate qualification in Financial Planning and who has expert knowledge and experience in all aspects of investment planning, pre- and post-retirement, tax legislation, wills and estates, trusts and companies. In addition, to use this designation, they also have to have passed a professional competency exam and have at least three years of work experience. All CFP®s belong to the Financial Planning Institute of Southern Africa and have to adhere to a set of professional ethics and standards. You can, therefore, be assured that when you partner with a CFP®, you are making the best choice when it comes to entrusting an individual with your investment portfolio.

3. Are you independent?

Often financial advisors or practices are tied to a specific company or brand, and this limits their ability to give advice as they are only authorised to advise on a specific range of financial products. An independent advisor can advise the investor on a broad range of solutions with no built-in incentives or commissions that could sway their recommendations. As a result, they are far more likely to continually assess and review the financial solutions on offer in the marketplace and ensure that your portfolio comprises the most appropriate solutions for your risk profile and needs.  

4. Do you have indemnity insurance?

Indemnity insurance adds an extra level of protection for the investor. Professional indemnity insurance covers financial advisors if they are found liable for losing client money through professional negligence or omissions. Indemnity cover insures against any money they manage that is stolen due to fraud. When this insurance is in place, whether the amount being claimed is R50 000 or R10 million, the client will have some level of comfort that they could potentially recover some, if not all of their money. Therefore, you should make sure that the financial advisor you have approached has the appropriate risk policies in place and request the amount for which they are insured. 

5. Do you have a succession plan in place?

This is one of the most overlooked questions that investors should be asking their potential advisors. Generally, people expect their advisor to be around forever but in truth, they could resign, retire, or unexpectedly pass away, which often leaves the client in nowhere land if the company is a one-man business. Ensuring that the practice has a succession plan in place makes any change seamless and guarantees that the investor will continue to receive the same level of service and admin support they have come to expect.

6. Will my money be exposed to balance sheet risk?

Clients need to also ask whether or not their money is exposed to balance sheet risk in the companies they are dealing with. Let’s use NFB as a case study for this. We have gone to great lengths to ensure that no clients hold balance sheet risk through NFB, so whilst we have been around for 38 years, if we had to close the business tomorrow, there would be no implications for our clients from a financial perspective. That’s because the balance sheet risk of all our clients’ investments is with other institutions i.e., Investec, Ninety-One and Allan Gray. However, this might not be the case for every practice. When you are partnered directly with a large institution, there’s not much of a risk as their respective balance sheets may be strong, but when you are dealing with smaller companies or boutique advisory firms, it is an important question to ask if you are unsure. Some products might be exposed to a FSP’s balance sheet for example through structured products, this however should be. It is nevertheless advisable to ask what balance sheet risk you carry with your chosen FSP.

7. How do you structure your portfolios and why?

When you get to a point where the prospective financial advisor presents you with a portfolio of investment recommendations, and they advise that you invest in a specific fund, you should always ask them how and why those particular funds were selected. There are 1 400 unit trust funds on the market, so it’s important to understand why a specific blend is being recommended. From an NFB perspective, we rely heavily on Asset Managers who conduct rigorous research of the various funds available. Using qualitative and quantitative due diligence processes, they deliver a research-intensive document or “house view” that essentially recommends the best funds for our clients. If one of our clients then asks why a specific fund has been recommended, we have the research showing why we have backed and recommended that specific fund. Your prospective financial advisor should be able to do the same.

By asking the right questions from the onset, you can avert any potential problems in the future when choosing a financial advisor, knowing that you have safeguarded your hard-earned money in the most secure way possible.


With NFB Private Wealth Management by your side, you’ll find peace of mind in the fact that every aspect of your financial plan is expertly handled. Contact us today!