Question:
How much does the services of a Certified Financial Planner (CFP) cost?

I have never considered using one, but after regularly reading the 'Ask the Experts' articles I've been thinking about doing so.

Can anyone see a CFP? I don't make a lot of money and don't have any assets, but see the value of getting professional help — if I can afford it.

Answer:
Will the services of a proper financial planner break the bank?

You have obviously spent a lot of time thinking about how to ensure that you make the right financial decisions for the right reasons. Your question also expresses the uncertainty that keeps many people from taking the next step forward. As is the case when you need the services of a doctor, lawyer, accountant or other professional, I believe there are three major obstacles we need to confront when seeking the services of a financial planning professional: Where can I find a good one? What will it cost? And what should I expect?

So let's look at these questions more closely. The first question focuses on finding a good financial planner. Before we look at the 'where' part of the question, we need to consider exactly what 'a good financial planner' means. To my mind, the critical component of valuable advice is independence. This means that the advice you should expect must put your interests first. I doubt that this will be the case with someone who gets paid by a product provider to supply you with 'advice'.

To ensure that you start looking in the right places, you therefore need to focus on finding two things: Firstly, someone who is incentivised to give you advice that is in your best interests. This implies that you should be the one paying them. Secondly, you need to be sure that this person has the appropriate level of expertise and experience to ensure that the level of advice is sufficient for your needs. As you quite rightly touched on, the industry standard qualification for those who have been educated to provide proper advice is the CFP® designation (an abbreviation for 'Certified Financial Planner', hereafter referred to as a CFP). You may also look for someone with appropriate degrees in commerce, law, accounting and financial planning to give you a measure of security.

So how do you go about finding one? The easiest point of departure will be to use a search engine to identify financial planning professionals in your area. The website of the relevant firms should detail the qualifications, fee structure and financial planning process you can expect. Another way to specifically find a CFP is to go through the Financial Planning Institute of South Africa (FPI). The FPI is the professional body that governs the qualification and competency levels of CFPs. On their website (www.fpi.co.za) you can click on the 'Public' link and select the 'Find a financial planner' option. This will list all of the registered CFPs in the area you specify.

The second question you need to consider is what you should expect to pay for the services of a financial planner. Most financial planners do not charge for their first consultation as they first need to establish what your needs are and how they can be of value. Before you see your prospective financial planner, you can also clarify the costs that you should expect to pay.

The basic fee models you can expect are as follow:

• Hourly rates: Typically, you should expect a fee of between R400 and R2000 per hour. The financial planner should clarify how many hours you can expect him or her to spend up front.

• Plan fees: A fixed fee is charged for the financial plan. Typically you can expect to pay between R2000 and R20 000 depending on the planner and the complexity of your needs. Some planners offset the plan fee against any fees and commissions they may collect if you should instruct them to implement their recommendations.

• Commission: There are a number of financial planners who still work purely for commission. You need to decide to what extent this still allows them to put your interests first.

You then need to consider the question of what to expect. Before you commit to paying your financial planner his or her fee, it is important to understand exactly what you can expect for your hard-earned cash. The financial planner should explain the process they will follow, the nature of the advice you can expect and to what extent they will be able to implement and review your plan. There are broadly three different advice models:

• The pointer. These planners will tell you what needs to be done and then leave you to find the professionals to do it (e.g. insurance brokers, lawyers, accountants, etc.).

• The mapmaker. These planners will detail what the necessary structures and changes to your portfolios and investment strategies will be for you to reach your financial objectives.

• The guide. These planners will not only detail what needs to be done, but will provide a dedicated ongoing service to make sure that you stay on track. Very often, you will find that they have dedicated planners for clients that focus purely on achieving this.

Lastly, it is important to realise that the relationship you will forge with your financial planner is likely to be one of the most important relationships you will have. You therefore need to find someone who you feel comfortable with and whom you trust completely. So it is vital to find a planner who understands you as a person.

A good planner will ask questions to enable you to outline what matters most in your life and will help you clarify the goals you want to achieve with your money. These questions will acknowledge that not all your goals are purely financial — non-material goals are often just as important. The principle we need to remember is that every decision we make has a financial consequence. It is therefore important to find a financial planner that puts your most important life goals first and then plots the right strategy to help you achieve them.

The increased understanding of the need for good advice that connects with both the head and heart has led to the incorporation of behavioural finance into financial planning. Behavioural finance is a new academic discipline that strives to understand human behaviour with money and has led to a deeper appreciation of the emotional drivers that impact on financial decisions. While the importance of the head and the heart will vary for each person, a successful relationship with a planner must satisfy both appetites.

A successful advice relationship connects with the head and heart. The table below has examples of how good advice should make you think and feel.

HEAD HEART I've just had a meeting and I know… I've just had a meeting and I feel that they… My adviser's qualifications and experience People I can really trust The services they offer Understood my situation What I am going to pay Related to me Who will be helping me Really care What I can expect from them Listened to me

By following the above as a guideline, you should be able to find a shoe that fits. Just remember that you are paying good money for a service that should, over time, become the most valuable advice you've ever paid for. Take the time and trouble up front to find the right people to do this and know what you're getting in return. This may well be the most valuable research you will ever do.

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