If you have an investment policy or product, the adviser who sold you that product is most likely receiving ongoing advice fees or commission. These fees are deducted from your investment returns, and you should be receiving ongoing service from that adviser.

Yet many clients are unaware that they even have a financial adviser, let alone that they are paying for one.

As you are most likely still paying advice fees, even if you have not heard from your adviser in years, it may be worth finding a new adviser.

Product provider vs adviser

It is important to understand the difference between a product provider and an adviser. The product provider is usually a financial services company, and the adviser is the person licensed to sell the product.

The adviser may work directly for the product provider as a “tied agent” or the adviser may be independent.

Listen to Maya and Mapalo Makhu discussing this topic on the My Money, My Lifestyle podcast.

According to the Association for Savings and Investment South Africa (Asisa), the relationship between a customer and a financial adviser can be terminated at any stage, however, there are savings and investment products that require the customer to have an adviser because the product requires ongoing advice.

Asisa explains that the role of the product provider in the relationship between the client and the financial adviser is to facilitate the collection and payment of regulated commission or advice fees.

When you purchased the product, you would have given the product provider a written mandate to pay your appointed financial adviser the relevant fees.

How to change advisers

Check your original investment contract and find the name of the adviser. If you have not heard from that adviser, you should contact the product provider. You may even find out that the individual no longer works for the company.

The product provider will ask you to complete a form instructing them to either change the adviser on record or remove the adviser on record.

In some cases, you may be able to remove an adviser altogether, however some product providers require you to have an adviser. The company will assist you in appointing a new adviser if required.

If you already have a new financial adviser, they will likely help you with the submission of a “Change in financial adviser form”.

This form will also guide you regarding the changes that can be made to fees and commissions subject to the terms outlined in the policy document and the fee structure agreed on when you bought the product.

Typically, upfront fees and commission paid when the policy was initiated are non-refundable, while ongoing or “as-and-when” fees that are directly linked to the commission or advice fees, may cease with the termination of the relationship.

If you appoint a new adviser, the ongoing fees in respect of commission or advice fees are renegotiated.

Asisa says that it is difficult to provide a blanket overview of how different product providers apply commissions and advice fees when there is a change/cancellation of adviser, since this depends on how the product was designed, when the products were bought (new-generation products are more flexible), and the systems in place.

However, this information must be disclosed by the product provider when you inform the company that you are terminating your relationship with your adviser.

In the case of older-generation products, most of the fees were paid upfront and cannot be recouped. The ongoing fees are much lower and as a result, you may find that new advisers will recommend that you switch to a new product.

It is important to first find out the financial consequences of making a product switch and whether that makes sense to you financially, or only for the adviser.

If you want to stay with the original product, the product provider may waive any ongoing fees if you do not have an adviser linked to the product.

Lelané Bezuidenhout, CEO of the Financial Planning Institute of Southern Africa, recommends that if you want to change advisers, you should first identify your preferred new adviser. Ensure that the adviser is properly licensed and has the relevant qualifications, experience, and designations (such as a CFP professional).

The new adviser becomes accountable and responsible for advice and services from the time they are officially appointed, and they are only accountable for the services and products for which they were appointed.

Check the change has been made

Some financial advisers have raised concerns that product providers are not changing or removing financial advisers when instructed to do so.

In some cases where a client has asked to change advisers and is no longer being actively serviced by their original adviser, the name of the original adviser remains linked to the client’s investment.

This can also happen when an adviser moves company and no longer represents the product provider. This results in “orphan clients” who are not allocated a new adviser and receive no ongoing service, although advice fees have been deducted. So be sure to follow up with the product provider to ensure the rquested change has been made.

According to the General Code of Conduct for Authorised Financial Services Providers and Representatives, a provider must give immediate effect to a request from a client to change advisers.

The Code of Conduct also states that where an adviser is no longer a representative of a product provider, the company must take reasonable steps to notify all affected clients and ensure that outstanding business is completed or transferred to another adviser.

If you have requested a change in adviser and it has not happened, or you discover that your adviser left the company several years ago, you can lodge a complaint with the product provider.

If that is not resolved, you can lodge a complaint with the FAIS Ombud through their website.

This article first appeared in City Press.