In June 2014, the Financial Markets Authority (FMA) estimated that there were approximately 1,700 practising Authorised Financial Advisers (AFAs) in New Zealand. Out of all these people, who’ll be the person you want to take care of you and your investments? How and where do you begin your selection process?
We hope that the following questions and general information will be of some assistance.
- What are your qualifications?
You’ll want to work with someone who is competent. The FMA advises that AFAs should either hold the New Zealand Certificate in Financial Services (Level 5) or, alternatively, something like a graduate diploma in business studies with a focus on financial planning. You can read more about this in the FMA’s Code of Professional Conduct for AFAs.
Certified Financial Planner (CFPCM) is an internationally recognised accreditation and is regarded as a long-term commitment to the industry. Do they already hold this, or are they working towards it?
If your adviser has gained qualifications overseas, have a look at that country’s financial authority’s website to check their relevance to investment planning. Even with overseas accreditation, the adviser will still need the appropriate NZ qualifications to act as an AFA.
- Are you registered with the FMA?
Individuals and businesses who provide financial services in New Zealand must be appropriately authorised and regulated, and appear on the Financial Services Providers Register.
The FMA requires that every adviser has a current Primary Disclosure Statement. Ask if you can see a copy prior to your meeting.
The FMA also has lists of unregistered businesses and businesses to be wary of. These are updated regularly and may be worth checking from time to time.
- Which professional association do you belong to?
For example: the Institute of Financial Advisers is the currently one of the industry’s main professional bodies. It describes itself as the home for New Zealand’s top professional financial advisers – or those who want to be. It has links to 25 countries, and aims to share financial planning best practice with its members. Each professional body will have its own code of ethics and practice standards that its members have committed to abide by.
- What sort of advice do you give?
What is their area of speciality? Make sure that the services they offer match what you need. It makes sense that if you’re interested, for example, in investment planning, that your adviser has experience and a genuine focus in this area.
- What is your investment philosophy?
Or, to put it another way, do they recommend investments that employ active management or passive management strategies? What’s their decision-making process? How do they do their research before they present recommendations to you? What factors do they take into account, and why?
- Is your advice impartial or restricted?
This is important. Are they able to offer recommendations from the wider market or are they tied to certain products? Are their any other potential conflicts of interest of which you should be made aware?
- How are you paid?
Sadly, there’s no such thing as a free lunch. Everyone has to make a living, and it’s worth knowing how your adviser makes theirs. Make sure they clarify the initial costs and ongoing costs. Their fees should be transparent and easy to understand.
- Who are your clients?
Will they be on your wavelength? Do they regularly work with people like you? Are the majority of their clients of a similar age, situation or investments sum?
You may also wish to ask what the adviser expects of their clients. What do they want and need from you in order for the relationship to flourish?
- How often would you review my investments?
It’s important that your portfolio stays on track and relevant to your goals and circumstances. This means it should be reviewed at least annually. Do they keep in touch with their clients on a regular basis and, if so, how – by phone, e-mail, e-newsletter?
Sometimes life throws you a curveball, and you may wish to speak to you adviser urgently. Are they easily contactable by phone or e-mail? How quickly do they aim to respond to enquiries?
- Do you work alone or as part of a larger team?
This is worth asking, especially if you value a one-to-one working relationship. Will this person be the one who’s actually looking after you, or will they delegate to someone else within their firm? Are they your primary point of contact?
What happens if you need help and they’re not available, for whatever reason? What kind of contingency plan do they have?
Kingshield Investments offer qualified, impartial investment advice to clients across New Zealand. For a friendly, confidential chat about how our advisers may be able to assist you, please contact us or call (09) 930 6933.