Willie Fourie, Head of Estate and Trust Services at PSG Wealth
Excessive costs can erode your growth, so being cost-conscious makes sense. However, cost is only one consideration when it comes to having an estate plan drawn up by a professional. At the other end of the scale there is the reality that any costs saved in terms of fees can be outdone by the cost inflicted by a poorly drafted, or invalid will on your loved ones who are left behind.
Advisers are often confronted with this when providing professional advisory services to clients. Since returns on investments can be nullified by excessive advice or ongoing management fees, cost-consciousness is one way to ensure that investment returns are not depleted. However, it does not mean that clients should not expect to pay a reasonable fee for professional advice – especially if one considers its importance, as it is literally intended to be the last word.
Beware of selecting the cheapest option
One thing that has proved itself many times over, and something that many of us have experienced to some extent, is that the cheapest quotation can turn out to be the most expensive nightmare. You’ll intuitively know what I mean when you think about either your own or your friends’ experiences when it comes to home renovations. We all know someone who has fallen into this trap.
Without exception, people seek the most expensive and skilled medical advice they can afford when faced with a life-threatening illness. Why is it then that people are prepared to risk their entire life savings and transfer of wealth to the next generation by seeking free fiduciary advice?
Warren Buffet once said: ‘price is what you pay, value is what you get’, and this is a great way to evaluate free advice.
On closer inspection, free advice may not in fact be free at all – it could turn out to be more expensive in the long term.
Proper fiduciary advice uncovers a specific need
What then is the cornerstone of obtaining specialised fiduciary advice? The fundamental basis of proper fiduciary advice should be a process to uncover a specific need and then deliver the most appropriate solution in the most cost-effective way.
By following this process, clients are then not merely buying a financial product or intermediary service, but rather a bespoke solution to a perceived need. Only once the value of the service or advice becomes clear will the associated advisory fee be readily accepted.
A common request to fiduciary practitioners is to evaluate or give a second opinion on existing estate planning structures that were obtained for free (or even copied from a do-it-yourself website). A standard template will sometimes be adequate to at least have a legally enforceable will that deals with the most basic of situations, but this is an exception rather than the rule.
My assessment and comments in this article are intended to assist in helping individuals understand this and spur them into action. It’s best to get your fiduciary affairs in order as soon as possible. In my view, a bespoke drafted will based on a solutions-driven process, is the most suitable approach to go the distance.
Make sure your fiduciary practitioner is both skilled and appropriately qualified
Ideally, your fiduciary practitioner should be a member of the Fiduciary Institute of Southern Africa (FISA) and have the FPSA (Fiduciary Practitioner of South Africa) designation. This is awarded by the institute once a member passes the required examinations and through annually obtaining a certain minimum number of points for continued professional education. All fiduciary practitioners at PSG are required to obtain this designation.
We firmly believe that the value of obtaining quality advice from a specialist fiduciary practitioner far outweighs the cost of the advice, particularly in keeping with changes in legislation.