How Can You Tell Whether a Financial Adviser Is Independent?

An attractive website and a long product list answer very little about who can influence the advice. A direct client fee answers one payment question. It does not reveal every other financial relationship.

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What does the legal restriction cover?

Section 3(5) of the General Code restricts a provider from describing itself or its services as independent where specified relationships exist. These include significant ownership between the provider or its associates and relevant product suppliers or their associates; certain direct or indirect supplier financial interests; and other supplier relationships creating a material conflict. The exact parties and exceptions matter. General Code, section 3(5), as amended in 2020.

The rule expressly excepts specified categories of financial interest, including certain regulated commissions. It does not define independent as “receives no commission”. Nor does receiving a direct client fee automatically satisfy the ownership and relationship tests. The enacted 2020 amendment is the relevant legal change; older Retail Distribution Review proposals are policy history, not a substitute for its wording.

There are therefore two separate questions: may the provider use the description, and is the actual advice sound? A conflict disclosure cannot simply override a restriction on the description. Equally, an adviser who does not use that description is still subject to conduct and suitability duties.

Ownership is more than the name on the door

Ask for the advice firm's legal name, its owners and the relevant associated entities. A trading name can obscure the distinction between the adviser, platform, insurer, investment manager and group holding company. It is the relationships between the actual entities that need examination.

The General Code refers to the Financial Sector Regulation Act's concept of a significant owner. Section 157 includes direct or indirect ability to control or materially influence a financial institution, alone or with related persons. It is not confined to owning more than half the shares. Its specified tests include governing-body appointment powers and a qualifying stake.

This matters when the answer is “the adviser owns their own business”. That can be true while another entity holds relevant rights or while the advice firm's associate has an interest in a product supplier. A percentage in a short disclosure may require the underlying structure to be explained; the reader need not reconstruct a corporate group from a logo.

The practical request is specific: identify the entity, the interest or control right, the relevant product relationship, and the firm's basis for concluding that its description is permitted. A legal or compliance assessment may be necessary where the structure is complex. This article does not certify a particular firm's status.

Follow payments even when the advice fee is unchanged

Consider two invented arrangements for a R5 million portfolio. The client advice fee is 0.60% a year, or R30,000, in each. In the second, a proposed supplier arrangement would make the advice firm eligible for another R12,000.

These are hypothetical amounts, not ClearGauge fees or evidence about another firm. The table does not assume the proposed R12,000 payment is lawful. Its nature and eligibility conditions require examination under the applicable rules before it could be accepted. Read both sources of receipts in the comparison above.

The unchanged advice fee does not establish an unchanged incentive. But R12,000 is also not automatically an extra charge to add to the client's disclosed total. It might be paid from another stated charge. Without tracing its source, adding it again could double-count the cost. There are two records to reconcile: what the client pays and who receives or becomes eligible for each benefit.

Ask whether a payment depends on the platform selected, the product, the amount placed, a referral, or continued participation in a commercial arrangement. Ask about eligibility as well as money already received. A benefit that has not yet been paid can still influence a decision.

The same enquiry applies to non-cash support and related-party services. A fee labelled administration or research cannot be assessed from its name alone. Establish the service, recipient, payer and conditions. Disclosure makes the arrangement visible; it does not settle its permissibility or prove that the client's outcome is fair.

Is a fee-only adviser free of conflicts?

No remuneration model removes every incentive. An asset-based fee can create a commercial preference for keeping money invested rather than using it for an appropriate competing purpose. An hourly model can reward additional work. A fixed project fee can create pressure to contain the time spent. These are potential incentives, not allegations that advisers using those models act improperly.

The useful test is how the service deals with the competing interest. If reducing debt is a credible alternative to investing more, does the written analysis examine it? If no product change is justified, can the agreed assessment still be completed and paid for? If another specialist is needed, is that limitation recognised?

The ASISA Smart About Money explanation of planner remuneration describes commission, fees and hybrid arrangements. Those commercial categories help identify questions. They do not replace the General Code's more specific independence test or establish that a fee model makes advice objective in every case.

Does access to many products establish independence?

A broad product panel can expand the available choices without resolving ownership or payment relationships. Conversely, an adviser may use a researched panel rather than investigate every product available in South Africa. The important distinction is between a documented selection process and a restriction the client has not been told about.

Ask what lies outside the panel and what happens when the household's need cannot be served within it. Can the adviser retain a suitable existing arrangement, investigate an exception, or refer the matter to a different specialist? If the only possible answer is always the same product, the advice scope needs to be understood before judging the recommendation.

It also matters which decision the adviser is making. Selecting a platform, selecting a discretionary manager and choosing a fund are different roles. A connection at one level can remain relevant even when the underlying funds come from several unrelated managers. The DFM article explains delegated investment roles; a collection of fund names is not a map of the commercial relationships.

What does a useful conflict disclosure look like?

The General Code requires conflicts to be avoided where possible, otherwise mitigated, with relevant written disclosure and an accessible conflict-management policy. A generic sentence saying that conflicts may exist does not explain a particular recommendation. General Code, sections 3 and 3A.

For a meaningful review, connect the policy to the transaction under discussion. Record separately the legal entities, ownership or control, payments or eligibility, restrictions, dated evidence and unresolved questions. It is an enquiry tool, not a certificate or pass-mark system.

Suppose an adviser prefers one platform because it produces consolidated reports efficiently. That operational preference may be reasonable. The analysis still needs to establish the relationship, any financial benefit, the practical alternatives and the consequences for the client. The existence of an administrative advantage does not answer all four questions.

Now suppose the platform is unrelated, the remuneration is the same and the comparison supports using it. Those facts strengthen the explanation. They do not establish that every investment proposed on that platform is appropriate. Independence, implementation efficiency and suitability remain different claims requiring different evidence.

What would a failed test actually change?

An independence enquiry can produce different findings. Suppose the documents establish a disqualifying ownership relationship. The immediate issue is the description: a convincing recommendation does not make that relationship disappear. Whether the underlying arrangement still fits the household is a separate assessment.

Now reverse the case. The ownership and remuneration explanation supports the description, but the adviser has not considered a known near-term payment before recommending a long-term commitment. A supported independence claim does not repair that missing suitability analysis. The relationship evidence and the advice evidence can point in different directions.

There is also an incomplete case: the firm says there are no relevant benefits, but the recipient and terms of a related service remain unexplained. That is an unresolved fact, not proof of misconduct and not a clean bill of health. Identify the missing agreement or explanation. A checklist that turns every unknown into either a pass or an accusation loses precisely the distinction the enquiry is meant to make.

How do you check the description without judging the whole service by it?

Begin with the provider's legal identity and relevant authorisation through the FSCA's provider search. A licence check establishes the authorisation information returned by that service; it is not an FSCA endorsement of an independence claim, competence for a particular problem, or investment performance.

Then obtain the firm's written explanation of the relevant relationships and its use of the description. Where the information is incomplete, ask for the missing document or clarification. Where the answer appears inconsistent with the rule, that is a reason for a qualified compliance or legal enquiry, not a conclusion that an entire portfolio must immediately move.

Commercial relationships can change. An explanation given several years ago may not cover a later acquisition, new ownership right or supplier arrangement. A dated record makes it possible to identify what needs updating without treating every routine review as a fresh corporate investigation.

ClearGauge's judgement is that a credible independence claim needs both a legal basis and an intelligible commercial explanation. It is not enough to say that the adviser is well intentioned, paid directly or able to select from many funds. Once the description is supported, the actual recommendation still needs to be tested against the household's facts.

For the wider appointment decision, use questions before hiring an adviser. This article supplies an educational method for examining the claim. It does not determine that a named firm is independent, that a conflict is permissible, or that an existing recommendation needs replacing.

Sources and as-of note: researched 6 September 2026. The General Code is read as amended, including the enacted 2020 restriction; FSR Act references concern the statutory ownership concept. No individual firm's current independence is certified. The payment example is invented and does not authorise its proposed commercial arrangement. General education, not personal financial or legal advice.