The financial planning evolution

Like YouTube, Crocs and global warming, financial planning as we know it today simply did not exist twenty years ago. Today’s highly regulated profession – which is governed by a series of stringent legislation, governed by the Financial Services Board (FSB) and accredited the Financial Planning Institute (FPI), is a far cry from the industry that existed in our fledgling democracy of 1995. Financial planning of yester-year – with its perverse incentives, excessive fees and punitive penalties – has thankfully evolved into an honourable profession advanced by internationally recognised certification, whose values are rooted in the virtues of independence, transparency and client best-interests.

Previous generations, many of whom were employed for life by a single employer, experienced little need for financial planning advice. Insurance and pension fund benefits were provided as a matter of course by one’s employer until the legislated retirement age of 65. With human longevity far shorter than we enjoy now, post-retirement needs were sufficiently provided for by one’s pension fund for the remainder of one’s life.

However, restructuring of the workplace and massive changes to the global economy have resulted employees enjoying a wide variety of employment opportunities during their careers – an estimated nine jobs in a 45-year career –  which in turn means shorter job tenures, less consistent retirement funding benefits, more opportunities to withdraw pension fund savings, and ultimately more complicated financial planning needs. Together with increased human longevity and a more complicated regulatory environment, South Africa’s financial planning industry has developed into an essential service for most income earners.

The financial planning industry is undoubtedly one of South Africa’s most heavily regulated industries – and rightly so, given the enormity of the job of advising clients regarding their hard-earned assets and their financial futures. The industry’s bible is the Financial Advisory and Intermediary Services Act of 2002 (FAIS Act) which governs the manner in which financial planners conduct their business and interact with their customers. In terms of the Act, all financial planners are required to be licensed, accredited and follow a strict professional code of conduct.

Any financial planner intent on credibility, independence and being optimally qualified, should be a registered member of the Financial Planning Institute of South Africa (FPI) and have achieved the Certified Financial Planner® accreditation. The FPI is the leading professional body for South African financial planners, and works together with financial planning institutes in twenty other countries in order to secure a high international standard for the profession. In fact, the CFP® certification denotes the highest level of financial planning excellence world-wide, and is the recognised benchmark for fair, sound and independent advice.

The need for highly qualified financial planners to navigate the inherently complicated areas of estate & succession planning, retirement funding, income tax, matrimonial property and risk, has given rise to the introduction of the increasingly sought-after B.Com Financial Planning Degree which is now offered by most South African universities.

When it comes to being the recipient of financial advice, the South African consumer is well-protected, not only by FAIS and related legislation, but also by the FAIS Ombudsman whose role it is to resolve disputes between the industry and its clients in a manner which is fair to all. To ensure further protection every financial planning practice – and each advisor within the practice – is require to be licensed, accredited and monitored. Each financial planning practice is also required to be independently audited by external Compliance Officers on at least an annual basis to ensure that the advice dispensed is fair, transparent and in the best interests of the client.

A much-needed and long-overdue part of the evolution process has been the ground-breaking move by a select number of financial planning practices in South Africa to develop fee-based practices. The shunning of broker commissions and perverse incentive structures by these practices has given rise to a new breed of fiercely independent and unashamedly transparent financial advisors who understand that their real value lies in the quality and legitimacy of their written advice. Unencumbered by sales targets and irreverent of upfront commissions that are apropos of nothing other than good sales skills, fee-based financial advisors are not affiliated with any one investment house or insurance company, and charge a professional fee for their advice – much like a lawyer, accountant or tax practitioner would charge.

The professionalisation of the financial planning industry over the past twenty years has been a remarkable and very necessary journey from which has emerged a number of niche, independent, fee-based practices with their collective focus being on the quality of advice which is in the best interests of the client – sans monthly sales targets or mal-aligned incentives. Sound, independent and well-formulated financial planning advice which is paid for at fair value – and in accordance with the advisor’s credentials and experience – has now thankfully become the new normal. It’s been said that the only time we should ever look back is to see how far we’ve come. It’s been an encouraging journey.

Have a fantastic week!

Warm regards


Financial planning has evolved over the years into a sophisticated, fee-based profession.

Financial planning has evolved over the years into a sophisticated, fee-based profession.

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