Flying high

FPI Financial Planner of the Year Janet Hugo


The FPI Financial Planner of the Year award is not a popularity contest but a gruelling ordeal in which the financial planner is subjected to expert scrutiny at every stage of the planning process to determine who will have the honour of being appointed FPI and CFP® professional brand ambassador. Sterling Private Wealth’s Janet Hugo talks to us about the advisory style that won her this year’s award.

“It’s very client-centric,” says Hugo. “They want to see that you engage with the client, that you explain what they’re involved in, and that the product is a financial plan rather than an investment strategy or an investment product.”

Hugo’s award-winning submission was a real scenario where the client was planning to retire in two years’ time and wanted to know whether he and his wife should invest in a retirement property in a village and rent it out or hold on to the money for the next ten years, when they would be old enough to purchase a property in a retirement village. “It was very much an advice-driven question, taking into account the impact such an investment would have on their retirement income, and looking at the risk – whether they’ve contingency plans, cash flows and so on,” says Hugo.

First principles

The award-winning financial plan was underpinned by the same principles that Hugo applies to all her financial planning: “For me, it’s about taking doubt away from real-life scenarios. You can’t take doubt away completely because you’re dealing with a moving target and life is incredibly uncertain, but you can inform yourself as well as possible. This means identifying all the potential risks to your future financial security – health risk, risk of theft, risk of accident, risk of the stock market crashing – and applying your mind and deciding whether you want to pay to mitigate this or that risk or not.”

Communication plays a very important role in this approach. “As financial advisors, part of our job is to take the complex environment that we work in – law, investments, taxation, behavioural finance, and so on – and interpret those aspects into clients’ lives, for their personalities, in the context of their situation,” Hugo says.

“If you’re going into an investment and you know that it’s going to be a bumpy ride, you’re less anxious when you are fully informed,” says Hugo. “When we explain concepts like ‘time-weighted’ or ‘liability-matched’ investment strategies that determine investment outcomes, at first their eyes are like saucers and they’re a bit distrusting, but over time they grow in their confidence and knowledge – provided that the situation is interpreted appropriately for them.”

Changing perceptions

As FPI brand ambassador for 2019, Hugo intends to change clients’ perception of the purpose of financial planning.

“I would like clients to become more comfortable with the idea of paying for a plan as opposed to paying for a product,” she says. “Increasingly, my colleagues are getting clients who are happy with their advisors but would like a second opinion nonetheless. Maybe their advisor is a guy that they know from the golf club and they’re not 100% sure. In the UK it’s quite normal to pay for between 2 000 and 4 000 pounds for a plan, plus an implementation fee, which might be as much as 3% of the assets under management, as well as an ongoing fee of as much as 1%. It’s far more expensive than in South Africa and the advisors are charging it with complete confidence. I’ve got clients here who raise their eyebrows at a 1% fee, but relative to the UK they are actually getting away quite cheaply.

"My ambition as brand ambassador this year is to raise awareness that a professional financial planner is going to an hourly rate for the consultation, while the ongoing monitoring fee for assets under management is a completely service – not product – that is paid for. I would also really like my peers to be proud of the fact that we make a difference in people’s lives.”

Although the technical qualifications for being a financial planner do not require it, Hugo is an enthusiastic advocate of behavioural psychology. “Richard Thaler won the Nobel Prize for Economics last year and it’s all on behavioural finance. Kahneman’s book on behavioural finance, Thinking Fast & Slow, tells you how your brain works, and you know I do a better job if I can understand what makes my clients tick.

"For example, it can be a challenge when you’ve got husband and wife in the room, and they have completely different personalities, and you’re using language that speaks to her and it’s totally irritating him, when you ask how they feel, and he says not to talk about feelings when we’re talking about money.”

Best interests

When it comes to looking after their clients’ interests, Hugo advises financial planners to pay particular attention to medical cover. “When my husband fell ill, I managed to unwind all the investments in the life cover, but I was never clever enough to unwrap a medical insurance policy that we were told would be more than enough, so we didn’t need medical aid. Thank goodness that we went and got medical aid anyway – it rescued us as a family, because if we were on the medical insurance and facing the kind of medical bills that we do now, we would have been financially crippled.”

Hugo also advises advisors to keep a close watch on liquidity. “Unless you’ve got a huge whack of money in your medical aid savings account, there needs to be sufficient liquidity in the plan because oftentimes a medical aid doesn’t pay for diagnostic claims on your cover. So you go and have the CAT scan and the MRI at R10 000 or R14 000 a time, and you need to have enough money to be able to pay for those, so liquidity, emergency money is critical.”

Keeping an eye on clients’ interests means keeping an eye on the clients themselves.

“My niche is retirement planning, which making sure that the investment strategy matches the retirement plan and the cash flow analysis. The one thing we do for clients that made the most sense to me is what the old pension funds used to do with liability-matched investment needs – so the money you need for this year will be sitting in the money market, the money you need in two to three years’ time is going to be in a low-risk income fund, and the money you need in ten years’ time is going to be as much exposed to equity as possible.

"Such a diverse spread of investments takes a lot of monitoring and checking in with clients, making sure that they have been honest about their spending patterns as well as the needs that they have along the way, but it also takes a little bit of planning so that you’ve got the right cash flow matching up,” Hugo explains.

Quality, not quantity, is the name of the game, emphasises Hugo: “Overseas studies indicate that the optimal number of clients per advisor is maximum 100, because the review process and the work you put into these clients is time consuming. The client segmentation that we do is very much based on the kind of tasks that we do for each client, the checkpoints where we touch base with them, and the impact of that, so I will look for ways to make sure that we’re adding value to clients as well. It’s not just peace of mind – it’s also doing the tax planning, investment strategies, and optimising the pricing on the investments so they know exactly what they’re paying for and what they’re getting.”

As demanding as the work may be, Hugo wouldn’t change it for the world. “It’s hugely rewarding, I love the work that I do, and I love the impact that we have,” she says. “It’s a huge responsibility but to have earned that trust and continue working to keep that trust with clients is so important. To be alongside our clients as they go through life, to go through death and birth and seeing first grandchildren come along, it’s very rewarding. You’re taking dry abstract boring principles, the statistics that are in investments, and applying them to a wedding in five years’ time, or the purchase of a house. You’re planning for real-life things, and that’s a privilege,” she concludes.

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Issue 72