There’s plenty of free financial advice out there, including helpful guidance on the FMA website, fma.govt.nz, and sorted.org.nz. But sometimes people need personal advice about their specific circumstances.
Advice can be particularly helpful when your situation is changing. Perhaps you are starting a family, buying your first home, receiving an inheritance or approaching retirement. It can also be helpful when markets are volatile, as in early 2020, during the Covid-19 crisis.
You can often get free financial advice from banks. This should help you to choose between the different products the bank offers, and how to best use them.
And a growing number of financial service providers are offering digital financial advice – sometimes called robo-advice – on their websites.
But if you want high-quality independent personal advice – on which of the wide range of financial products out there would work best for you – you’ll have to pay for it. It might cost a few hundred dollars for some basic advice, or a few thousand dollars a year for comprehensive help. But it can be well worth it.
Before choosing an adviser, read about getting financial advice on the FMA website.
To be sure you find an adviser who seems to be on your wave length, ‘interview’ several. Most offer a free first consultation, usually in person. Ask lots of questions about their qualifications and how they could help you in your specific situation. A good adviser won’t try to apply a ‘one size fits all’ approach.
One sign of a good adviser is whether they ask you not only about your investments and plans, but also your debt. If you have any credit card or other high-interest debt, they should help you plan to get rid of that before making any investments. And if you have a mortgage, a good adviser should also discuss whether paying that off faster is a good move for you.
Take your time before choosing an adviser. Don’t feel pressured into making a decision quickly.
In many cases, an adviser will draw up a financial plan for you. They should discuss their recommendations and why they are suitable for you.
For more on what the plan should cover, see the FMA’s ‘What good advice looks like’ webpage.
How advisers charge
Some advisers charge you a flat fee, or an hourly rate. Others charge a percentage of the money you are investing through them. Always ask upfront:
How you will be charged, and an estimate of all costs to you.
Whether the adviser receives any money or other compensation from anyone else. Some advisers receive commissions or other incentives from financial product providers. I don‘t recommend you use such an adviser, unless they pass the commissions on to you in full. Otherwise there’s an incentive for the adviser to recommend products that better reward them.
Get the answers in writing.
A final word on advisers
It’s not uncommon to hear stories of people feeling intimidated by their adviser, who grows impatient or condescending about answering their questions.
This is not acceptable. You probably know heaps about other things, but not investments. That’s why you have hired an expert! She or he should welcome your questions and be happy to explain whatever you ask about.
If you ever feel intimidated by your adviser, ask them to change their ways or move to another adviser
This content is reproduced from ‘Hits and Myths: an introductory guide to investing by Mary Holm’.