Ask the right questions

…to make better investment decisions

By Samuel Rossouw


I often wonder why prospective clients ask certain questions when I meet them for the first time. They are probably trying to gain a better understanding of the suitability of the advice, but often these questions give the experienced salesman the ammunition to sell his products or services in a subtle way. However, if you understand the principles behind these questions, you would be able to better evaluate whether the advice is appropriate for your needs.

What investment returns do you offer?

If you had invested in a balanced unit trust fund over the past 12 months (ending December 2021), your return would probably have been north of 20%. However, any adviser who uses this figure as an indication of future returns is guilty of misrepresentation.

Russia invades Ukraine and markets tumble in the first quarter of 2022. When we do a 12-month evaluation of performance now, this figure is closer to 10%. The daily, monthly, and weekly activities in local and global markets, as well as the movement of the exchange rate, interest rates, and inflation figures have a major impact on the short-term performance of underlying funds. Furthermore, the specific measurement period plays a major role in the performance stated on the fact sheet. You must therefore make sure that you compare apples with apples when referring to returns. Expected returns should preferably be communicated in real terms, rather than nominal terms.

What are your fees?

With this question, people usually try to evaluate whether the fee is comparable to that of the adviser down the road or the adviser he met at a social last Friday. In most cases, cheaper (adviser) fees are an indication of the time and effort that the adviser will spend on your planning. You can buy a very cheap tool at the Chinese shop around the corner, but there is a good chance that you are going to buy yourself a pig in the poke.

So be wary of a “less is more” mentality here, but at the same time be comfortable with the adviser’s value proposition, regardless of whether the fees are comparatively low or high. Keep in mind that he/she is not a fund manager, accountant or economist and that fund manager and platform fees are charged separately. Active fund managers’ fees are generally much higher than those of passive funds (so-called ETFs). Please understand that I am not saying that cost is unimportant. It is very important, but what you as an investor is left with is after-fee returns and if the person is not skilled in investment advice and portfolio construction, the cheapest fees on earth will not save your portfolio from poor management and returns.

Is my money safe and is it guaranteed?

If “safe” means it is managed by experienced fund managers with a history of past performance and whose prices are readily available in the newspaper, then the answer is probably “yes”. If your view of safe means your adviser has a crystal ball that can predict the effect of Chinese regulation on Naspers’ share price or what impact Russia’s invasion of Ukraine will have on world markets, the answer is unfortunately “no”.

Many fund managers and economists can hardly predict short-term currency fluctuations, let alone world events! However, we do know that a successful investment strategy does not depend on the ability to predict world events. Unfortunately, it is not possible to guarantee returns or hedge against short-term declines in market-linked investments. Only banks and insurance companies offer such guarantees, but it comes at price. The sacrifice in terms of long-term performance is just not worth it.

I do not want all my eggs in one basket.

This is one of the more difficult requisites to address. When a client says this, they usually intend to split their investments between two or three advisers in an attempt to “diversify” their portfolio. In the same way that you cannot follow the advice of two doctors at the same time, you shouldn’t implement the advice of two or more different advisers. There is no problem in getting a second opinion, but ultimately you need to choose someone who you are comfortable with and stick to a strategy for the long term.

The benefit of diversification takes place between different funds, fund managers and asset classes, not between multiple advisers. In many cases, by managing all your investments on one investment platform (via one adviser) has significant cost advantages. It is important that you as a client understand the foundation of your relationship with your adviser as well as the relationship between other parties (such as the fund manager, platform, etc.) in a financial planning environment.

You need to be satisfied that the value that you derive correspond to the fees that are charged by the parties involved. Charging an ongoing advice fee on a money market investment for example is not a justified charge in our opinion. It goes without saying that fees also need to be communicated properly.

Asking questions doesn’t cost you. If you get the feeling that someone is tripping over aspects of your questions, you probably need to investigate a little further.

Samuel Rossouw is a certified financial planner and director at Woodland Wealth (previously known as ProVérte Wealth & Risk Management). Contact him at

Although all possible care was taken in the drafting of this document, the factual correctness of the information contained herein cannot be guaranteed. This document does not constitute advice and anyone planning on taking any financial action based on this document, is strongly advised to first consult with their personal financial adviser. Woodland Wealth is an authorised financial service provider with FSP no. 5966.

We use cookies to improve your experience on our website. By continuing to browse, you agree to our use of cookies