Info on Advisers

People often ask for advice on which financial adviser to go to. Mary is not in a position to recommend anyone, but readers may find the following information and table helpful.

Go straight to the financial advisers table below

Since July 2011, stricter rules have covered financial planners, brokers, people in banks offering financial advice and others in similar roles.

Advisers have to be one of the following:

• A registered financial adviser, or RFA, who can advise only on simpler financial products, such as insurance, bank term deposits and mortgages.
• An authorised financial adviser, or AFA, who can offer a much wider range of advice. AFAs have to pass exams about finance.
• An employee of a Qualifying Financial Entity, or QFE. QFEs include the likes of KiwiSaver providers, banks and insurance companies. People who work for them can give investment advice, but only on the products offered by the QFE — unless the person is an AFA.

Both RFAs and AFAs are checked for past criminal conduct. They have to act in your best interests, exercise reasonable care, and not engage in misleading or deceptive conduct. If you are unhappy with anything they do, there are several steps you can take, including going to an independent disputes resolution scheme that’s free to you.

An AFA is best qualified to help you find the right investments — bearing in mind your total financial situation and how much risk you are comfortable with.

To check if somebody is an AFA, go to the Companies Office website, and use the search box.

Some AFAs limit themselves to advising on products from only certain companies, while others cover a wide range — which is clearly better. Ask an adviser how many different companies’ products they offer.

Where do you start in your search for the best AFA for you?

My reservation about the “new and improved” financial adviser regime is that advisers are still permitted to receive commissions or other incentives from a financial product provider as a reward for putting clients’ money into that provider’s products. This practice is being phased out in other countries, and I hope we follow suit. There’s too big an incentive for advisers to recommend products just because they pay higher commissions.

Clients sometimes say they are happy with this, as they may be charged low or no fees, because the adviser receives enough commission income. But the quality of the advice they receive must suffer. Ask yourself: would you be happy if your doctor prescribed Drug A, even though Drug B was better, because the makers of A gave the doctor a bigger reward?

I far prefer advisers to turn down commissions, or pass them on to their clients, and then charge the clients fees. The adviser’s only motivation is then to serve their clients as well as they can.

It’s well worth putting time and effort into finding a good adviser. And once you find her or him, it can be well worth paying them reasonable fees. Over the long run, you could end up considerably better off.

For more on this, see “Fees-only Advisers”, below.

A good way to test an AFA

A good adviser — who is putting your interests first — should always ask every client at the start if they have debt. If yes, and the interest is higher than mortgage rates, the adviser should recommend repaying that before doing any investing.

Ditto — perhaps — for repaying a home mortgage. However, there are some advantages to also saving a little in shares, bonds and so on, for diversification and to learn about markets. And this argument is particularly strong if that saving is in KiwiSaver. If you contribute just the minimum to get all the KiwiSaver incentives, that will probably be better than putting that money into mortgage repayment. Beyond that, though, attack the mortgage.

What about a mortgage on an investment property? That’s not quite so clear-cut because the interest on that mortgage will be tax deductible so it doesn’t cost you as much. Still, if you are fairly risk averse, it wouldn’t be silly to reduce that debt too, before you do much investing elsewhere.

You might be wondering whether you should simply repay debt and skip the adviser until at least the home mortgage is paid off. Possibly. But a good adviser should help to ensure you are handling your debt optimally, and investing your KiwiSaver money wisely. They might also assist with mortgage choices, wills and so on. At an initial meeting, ask what they could do for you.

Fees-only Advisers

The advisers in the following table charge fees only. I don’t know most of them, and I am not in a position to recommend them. But their way of charging for their service is a good start! I suggest you “interview” several advisers before choosing one.

The advisers in the table are all AFAs, except the Australian firm, Roskow, which has an equivalent qualification.

Everyone except Baker Hawes, C Squared, Money Matters, Roskow and Stuart + Carlyon offers a free first meeting with a potential client. Those advisers offer a free initial phone conversation. Some advisers stipulate the first free meeting is only for half an hour. Readers should ask about this, so they know where they stand.

Every adviser has agreed to the following:

• “I guarantee that when I give any new client investment advice or help them to make any investments, the only money or other consideration I receive is explicitly stated fees that I charge the client. Any commissions or other considerations I receive from financial firms or others are passed on in full to the client.”
• “I promise to give any clients who request it a signed letter that says, ‘I truly believe I have given you the best advice I can, having considered a wide range of products, and that I have told you about all real or potential conflicts of interest.’.” I urge readers to ask for such a letter.

Note the “new client” in the guarantee. A few advisers said they had current clients who prefer to keep getting “free” service while the adviser receives commissions. But that won’t apply to new people approaching the adviser.

Advisers also had to state that they give advice on all types of investments, including property. By “property” I mean general advice in that area, not necessarily advice on specific property purchases. For example, the adviser could help a client weigh up whether to invest in rental property generally versus investing in a share fund.

Some advisers suggested we exclude advice on KiwiSaver, because hourly fees could be high relative to low KiwiSaver balances, whereas commissions might be around $5 or $10 a year. Said one, “We take the commission, disclose this and don’t charge fees for KiwiSaver for now.” That sounds reasonable. Readers should ask advisers how they handle KiwiSaver.

Note, too, that this whole exercise does not include insurance — only investment advice and products. Some advisers listed here do receive commission on insurance products. If readers want to go into insurance, you should ask the adviser how they will be rewarded.

And, of course, it’s important to ask about fees charged upfront and ongoing fees. I think good firms should disclose all this clearly on their website and in their literature.

Some advisers charge high “monitoring” fees and don’t seem to do much for that money. Said one adviser on a website recently, “I like it when clients challenge me over the fees I charge because it allows me the opportunity to reinforce what we actually do for them.” A good adviser shouldn’t mind your asking.

A few more points:

• I receive nothing from any of these advisers. I run this table as a service to readers.
• Many of the advisers sometimes travel elsewhere around New Zealand, so if you are particularly interested in an adviser, phone or email them to ask if they could meet you.
• The Australian firm in the table, Roskow, emailed me, “It’s useful for both NZ advisers and Aus advisers to know where the quality is so that we can refer other people there. We’re hard to find (due to our small marketing budgets compared to the ‘big boys’).” Fair enough.
• Please note: I’m not in a position to check what the advisers in this table have told me. I’m relying on readers to report back if an adviser doesn’t stick to what they’ve said, so please tell me!
• One final and important point: Some readers have told me that some of these advisers’ fees are high. Ask upfront what the fees will be, and perhaps comparison shop among several of these advisers.

Recommended: Listen to Mary’s May 3 2018 RNZ discussion with Jesse Mulligan on how to choose an adviser. It includes many useful tips.

Financial advisers who charge fees

Note: These people are not necessarily recommended. Please read Fees-only advisers, above, before using this table.

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Auckland
Bay of Plenty
Canterbury
Gisborne/East Coast
Hawke’s Bay
Manawatū-Whanganui
Marlborough
Nelson & Tasman
Northland
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West Coast
Australia