Choosing a financial adviser · South Africa
How Do You Know Whether Your Financial Adviser Is Acting in Your Best Interest?
You cannot establish an adviser's motives from a friendly relationship, a professional title or a good year's returns. You can examine whether the advice follows from your circumstances, whether reasonable alternatives were considered, how the adviser is paid and what happens when the evidence challenges the recommendation. The strongest practical evidence is a decision record that makes the recommendation understandable and open to challenge.
That record should explain the problem being solved, the important facts, the costs and risks you would bear, and why the proposed action is preferable to an available alternative. It should still make sense when the investment performs badly or the adviser earns less. This is a test of advice quality, not a method for declaring someone dishonest.
In this article
Separate a good outcome from a good decision
An unsuitable investment can make money. Suitable advice can be followed by a market loss. Judging only the result rewards luck and can excuse a poor process during rising markets.
Start with one consequential recommendation you actually received. Establish what was known when it was made: the spending deadline, your other assets and debts, the product terms, the information you supplied and the risks discussed. Then compare the outcome with that original reasoning. A later development should not be quietly presented as something that had always been anticipated.
For example, a volatile investment used for a home deposit due in six months does not become appropriate merely because markets rose before the payment. Conversely, a diversified long-term portfolio falling during a documented stress does not prove the adviser ignored your interests. The question is whether the consequence was affordable, understood and consistent with the purpose of the money.
This also leaves room for a reasonable change of mind. If your income, health, family responsibilities or objectives change, the recommendation may need to change. A useful adviser explains the new fact and its consequence rather than producing a new product as the explanation.
What the South African advice framework requires
Section 2 of the FAIS General Code of Conduct establishes duties of honesty, fairness, care and acting in clients' interests. Section 9 requires a record of the basis of advice where a financial-product transaction or contract results from it, including the information used, products considered and reasons for the recommendation. The requirement has a defined scope; not every informal conversation creates the same statutory record obligation.
The 2020 amendments to the General Code sharpen the information and suitability requirements in section 8. These include the client's ability to bear costs and risks and understand the transaction. Where the provider's product limitations prevent an appropriate recommendation, the amended provision requires that limitation to be made clear, the recommendation declined and another appropriately authorised provider suggested. Replacement advice also requires disclosure of its financial implications, costs and consequences.
These are useful foundations for a review. They do not turn a signed form into evidence that every assumption was sound. Nor does this article determine whether a particular adviser has complied with the law. A regulatory conclusion needs the actual facts and applicable requirements.
The FSCA's consumer resources provide a starting point for checking the provider and understanding the regulatory framework. Confirm the legal entity, authorisation and relevant service or product scope through the Authority. A registration number supports an authorisation check; it does not certify the quality of a particular recommendation.
Reconstruct one recommendation with evidence
Choose an actual instruction, such as moving a retirement investment, buying a policy or investing proceeds from a sale. Ask for the contemporaneous advice record, the relevant quotation and terms, the total cost disclosure, and your agreed service scope. Your aim is to trace the connection from your need to the decision.
| Part of the decision | Evidence that helps | A material question if it is missing |
|---|---|---|
| Your objective | Amount, date, priority and what would happen if it is not met | Is the recommendation solving your problem or a generic investor profile? |
| Ability to bear risk | Cash commitments, other income, debt and a quantified loss consequence | Could the household carry the proposed loss without missing essential payments? |
| Alternatives | A relevant comparison, including keeping or adjusting what you have where feasible | Why is this action better than the credible alternative? |
| Remuneration | Who receives each charge, its basis and what changes if you proceed | Does the comparison include the adviser's economic incentive? |
| Follow-through | Agreed work, responsibility, timing and evidence of delivery | Is the ongoing service connected to the fee and your changing needs? |
This is not a demand to compare every product in the market. The useful comparison is the one capable of overturning the recommendation. If the recommendation is to replace an existing policy, keeping its benefits must be taken seriously. If the recommendation is to invest spare cash, repaying expensive debt or retaining a necessary reserve may be a relevant alternative even though neither creates a new investment sale.
A risk questionnaire can start the conversation, but “moderate risk” does not reveal whether R300,000 is an affordable loss. Ask for the rand consequence and the response it would require. A reader who cannot follow the explanation should receive a clearer explanation, not simply another document to sign.
A worked example: advice that changes the adviser's revenue
Assume a household has R4 million under an asset-based advice arrangement. R600,000 of it is cash available for a decision. The annual advice charge is an invented 0.75%, including VAT, applied to the managed value. The household also has a home loan charging an assumed 10% and has identified R300,000 as the cash reserve it needs. Assume no tax or dealing cost on moving this cash, no change in the other investments and no withdrawal restrictions on the cash account.
There are three plausible starting choices:
| Choice | Cash retained from the R600,000 | Initial annualised loan interest avoided | Annual advice fee on remaining managed assets |
|---|---|---|---|
| Keep all R600,000 invested as cash | R600,000 | R0 | R30,000 |
| Pay R300,000 into the loan | R300,000 | R30,000 | R27,750 |
| Pay R600,000 into the loan | R0 | R60,000 | R25,500 |
The interest figures are the initial amount repaid multiplied by 10%. They are not a forecast of the following year's actual savings: the loan balance, payment schedule and rate would affect that. The illustration does not include the interest earned on retained cash, which belongs in a full financial comparison. The home-loan-versus-investing question provides that more complete framework.
Paying the full R600,000 into the bond reduces the adviser's annual fee by R4,500 under the assumed arrangement. It also empties the identified reserve. Recommending the option that pays the adviser least would therefore not automatically be the best advice. Access to prepaid bond money must be checked against the bank's actual terms; it should not be treated as identical to cash already available.
The R300,000 repayment retains the assumed reserve and reduces the annualised advice charge by R2,250 at the stated value. This identifies a different combination of cash and incentives; it does not select that option. The household's needs, loan terms, cash return and other resources remain necessary to assess any repayment.
The revealing behaviour is whether the adviser puts these alternatives and incentives on the table, checks the reserve, and explains the conclusion. A disclosure form listing the 0.75% fee without discussing the competing use of cash would leave the central judgement unresolved. This test applies to ClearGauge as well as any adviser whose work you review.
Identify conflicts without pretending they can all disappear
Different charging arrangements create different incentives. An asset-based adviser can earn less when money repays debt. A transactional model can reward implementation. A fixed fee can create pressure to limit the time spent on a complex case. These possibilities do not establish misconduct or tell you which model will serve you best.
The practical question is how the incentive is managed in your decision. Ask what the adviser and related businesses receive if you accept, decline or choose the alternative. Ask whether the available product range constrains the answer. Then examine whether those facts are reflected in the recommendation.
The General Code's 2020 amendments to section 3A address remuneration and fair outcomes; a disclosed payment is not a substitute for appropriate advice. For the separate question of what an independence claim means, use how to assess adviser independence.
You should also know what happens when you decline a recommendation. Legitimate risks may need to be explained and recorded. Pressure to act before a real reason has been established, or reluctance to supply the relevant terms, deserves a pause. Distinguish a genuine quotation expiry or administrative deadline from an unexplained demand for urgency.
Check the service against what was agreed
Advice quality is not confined to the sale. Take the service agreement and identify the work actually due: perhaps an annual review, a retirement-income reassessment or coordination around a specific event. Compare that promise with completed work and the issues it resolved.
More meetings are not necessarily better service. A review that confirms the plan remains appropriate can be valuable, provided the adviser has checked the facts that could change the conclusion. Conversely, sending a performance statement is not the same as reviewing a changed spending need or an expiring guarantee when that was part of the engagement.
Record any gap concretely. “The agreed income review was due in June; our updated spending figures were supplied in May; we have received no revised calculation” is more useful than “we feel neglected”. It gives the adviser a fair opportunity to explain, correct the record or complete the work. It also creates a clearer basis for escalation if the problem continues.
Decide whether the evidence calls for clarification or escalation
An incomplete explanation may be resolved by a written response. A consequential disagreement over assumptions may justify a bounded second opinion. Repeated failure to deliver agreed work may become a question about changing the adviser, even if no investment needs to change.
Where you believe advice or conduct caused harm, preserve the dated records and use the provider's complaints process. The FAIS Ombud's official portal explains the requirement to try to resolve the matter with the responding party and the supporting documents needed. Confirm its current scope, time limits and the effect of any legal proceedings before relying on that route. A financial review does not suspend deadlines or decide a legal claim.
ClearGauge's standard is that the client should be able to see why the advice serves the stated need, what it costs, what could go wrong and what would change the answer. If those connections remain missing after a fair request, the concern is substantive. A Financial Clarity Review can test a defined decision against its evidence; it should not begin with an assumption that the existing adviser or arrangement must be replaced.
Source review date and scope
Reviewed 6 September 2026. The cited conduct rules concern the scope of advice, remuneration and records; a conflict is not itself proof of client harm. The cash and fee amounts are invented and do not select a debt-repayment or investment decision. Complaint rights remain separate from buying another review.