16 October 2017 By PDSNET

Investment advice has become a big industry in South Africa and world-wide. Lay people with surplus cash obviously wish to generate a return which is better than inflation - and this requires that they take a degree of risk. Investments which are risk-free are inevitably also return free - especially after taking inflation and taxation into account. The business of investment advice is governed by the Financial Advisory and Intermediary Services Act (or FAIS - 37 of 2002). This Act requires that anyone who sells investment advice for a fee must be registered in terms of the Act as a "financial advisor". To obtain this registration the person concerned must pass a series of exams. The problem with financial advisors is that they are inevitably motivated by the commissions that they can earn on the investments that they manage to sell. High risk investments are more difficult to sell than low risk investments and for this reason usually pay a higher commission. For this reason, investment advisors tend to concentrate on selling the more risky investments. As a private investor you should strive to educate yourself in the art of investment so that you are free of the need for other people's advice or opinions. Focus on the facts and develop your own opinion. You will usually find that your selections are at least as good as the financial advisor - but they cost you nothing. Nobody cares about your money except you - so take responsibility for your own financial affairs.

Share this glossary term: