Insider tips for choosing a financial adviser

A transformation is currently taking place within the financial advice industry in New Zealand.  A whole new set of rules and regulations are coming into play early next year, changing the way financial advice is delivered.

Plans for this new advice regime were announced last year by Minister of Commerce and Consumer Affairs Kris Faafoi. He said the government wanted New Zealanders to be able to access good quality financial advice, because it can make a huge difference to people’s financial position and the quality of life they can enjoy.

Under the new regime, anyone giving financial advice to retail clients will be required to hold a licence and adhere to a new code of professional conduct. Gone are the days when just a handful of advisers – known as Authorised Financial Advisers or AFAs – were required to meet high levels of professional standards, while the majority of advisers had minimal specialist financial qualifications, didn’t have to provide full disclosure of their remuneration and conflicts of interest, nor follow a code of conduct.

New disclosure requirements are also being drafted, to ensure consumers have more, and clearer, information when choosing an adviser.  

Deciding on the right adviser for you is an important decision. Getting the right one can provide huge benefits in terms of your financial planning, wealth, and life options.

David Greenslade knows a thing or two about financial advisers. He has been involved in the industry for more than 30 years, including setting up two advisory companies of his own. Now he educates and audits advisers through his company Strategi.

Greenslade says under the new regime all advisers will have to meet minimum standards of competence, knowledge, and skill and must prioritise clients’ interests.

“Financial advisers will be covered under the same legislation as fund managers, banks, and insurers. The legislation is about good conduct and ensuring financial advice is suitable for the needs of clients”, he says.

“Gone will be the complexity of language and concepts. Under the new regime, advice needs to be communicated in a clear and concise way, so clients understand it.”

Greenslade says retirement can be scary particularly if it is not correctly planned. A financial adviser can help build a plan for this important stage of life.

He says there are a variety of reasons why having a financial adviser onboard can be beneficial.

• They can take a holistic view of your life, what you want to do, and help you dispassionately draft a financial plan.
• They have access to a wide range of financial products, so can identify the most appropriate financial solution for you.
• Financial products can be complex and confusing. A good financial adviser can distil the information into bite-sized chunks, so it is easy to make sense of and understand. This gives you greater confidence to invest wisely and use products other than the traditional term deposits, and cash in the bank.

“Think of your adviser as being your ‘trusted librarian’, they have access to large quantities of information and experience which they can quickly pull together to save you hours of work,” Greenslade says.

“They also deal with lots of clients just like you, so they can apply their experience to help you avoid many of the pitfalls of retirement and investing.”

Choosing a good one

If you’re looking for basic tips on how to choose a good adviser, the Financial Markets Authority has great information available, including questions to ask your adviser that is worth reading to get you started.

But Greenslade says that in his experience, there are five key considerations that are often overlooked or not included in published checklists.

Here are his insider tips, and questions to ask, to help choose the right financial adviser for you.

Insider tip 1: Can I relate to the adviser?

Does he or she take the time to really understand me and what I want to do? Is the understanding superficial – is it just about learning enough to sell me a product, or is it really genuine? Do they want to know about me and my family as people to have a long term relationship with?

Insider tip 2: Can I trust the adviser?

Can I really trust what he or she says and writes? Are the recommendations genuinely in my best interests and does he or she show me why that is the case? What do they do beyond the words and flashy websites and brochures to really demonstrate they understand trust, and meaningful relationships?

Insider tip 3: Does the adviser deal with people just like me?

Does the adviser know the sorts of issues I’m facing and what I want to do? Have they successfully helped others in the same situation? Is the adviser sufficiently experienced to help guide me to achieving my goals and do they know where the pitfalls are, and can they steer me around them?

Insider tip 4: Does the adviser make sense?

Is the advice provided in a way I can understand and act upon? Is the advice clear, concise and does it make sense? Does the adviser take the time to explain it in bite-sized chunks, then check in with me to make sure I’m comfortable with it?

Insider tip 5: Will we have the tough conversations?

Will the adviser challenge my thinking, tell me when I’m wrong, and care enough - and be organised enough - to keep me on track? When I deviate from our agreed path, does he or she bring me back to the plan? Does he or she care enough about me and my future to have the tough conversations with me? These conversations should ‘tell it as it is’ without any sugar coating.