15 March 21
Reading time: 7 minutes
Ever considered working with a financial adviser? As always, good advice is gold, and taking advice can make such a difference to your choices… and your life! Here’s what you need to know.
Changes in the way that financial advice is given across the country go live today. They’ve been a long time coming – and now it’s so much simpler and more straightforward to get professional advice for our key money decisions.
Sure, you may have a close circle of friends or a family member who is quick to offer an opinion on what’s best. But for bigger decisions and life plans, it helps to consult a professional. There are some good ones out there.
If you’ve bought insurance or have a mortgage, you may have already benefited from a financial adviser’s know-how. They’re qualified experts who can:
They’ll be qualified to advise you on particular products or plans – and are required to tell you what they can and can’t cover. For example, an expert just on life insurance can’t give you advice about KiwiSaver.
It’s okay to work with different advisers for different things, such as one for your mortgage, one for your insurance, another for your long-term planning. Some may specialise in more than one area, like planning and investment, which can be helpful.
Financial advisers have to meet a certain standard of competence and treat you ethically. They need to put your interests first and:
Sounds good, right? What I like most is that even if they have their own interests in the mix, they still have to put ours above theirs. This is both realistic (they have to earn a living and get paid after all) and ethical.
It helps to shop around for the right financial adviser for you before you decide which one to work with. We recommend you talk to at least three. Look for the right fit. This includes the way they communicate, relate to you and understand your situation.
Anyone providing financial advice professionally needs to be licensed by the Financial Markets Authority.
All financial advisers must either hold a licence themselves or work for someone else with one. They need to be registered as a financial adviser and tell you the name of the licence holder they work for.
You can check whether a financial adviser is registered and who they work for by searching for them on the Financial Service Providers Register. If they’re not on it, they are not a financial adviser. Best to find someone else.
Remember, a financial adviser is a member of your team, your ‘support crew’. They should be working for you.
A way to make sure they are doing just that is to see how they’re paid. They are required to tell you about any commissions they get. It’s important to ask.
If you’re paying them for their time, they’re definitely working for you, and that’s clearer to see and be sure of. But most advisers are paid by a company (like a lender, or an insurance or KiwiSaver provider) to sign up customers for their products, which is common practice.
When they are paid by a company to sell, the adviser has a conflict of interest. They might, for example, be more focused on promoting a particular product that brings them a commission and less on whether it’s the best one for you.
When there is a conflict though, financial advisers are now required to tell you up front and put your interests above theirs.
It also helps if your adviser offers products from a number of companies, not just one. So for example, if you are setting up car insurance, it would be good if your adviser could tell you about what company X, Y or Z offers, not just sell you on X.
This way they become more like your personal shopper, looking through products to find the best one for you. Remember, they are required to tell you which companies they represent and which products they can advise you on.
While there have always been human advisers you can meet in person, these days online services also offer full financial advice through an app, website or chatbot. We’ll be seeing more and more of these going forward.
The FMA licenses digital advice platforms just like they do human advisers, so you can be sure that the same financial advice standards and rules apply when you use them. You can look up the company behind the digital advice.
It’s good to know that financial advisers are accountable for their actions. If for some reason you have concerns about an adviser and how they treated you, you have the right to make a complaint.
Every financial adviser belongs to a dispute resolution scheme, a service that can look into whatever went wrong at no cost to you. The scheme makes sure you’re treated fairly.
All in all, the new financial advice setup has a lot going for it. But if all this seems a bit overwhelming, and you’re simply looking to get started with some debt or budgeting advice, remember that you can always contact financial mentors at MoneyTalks for free. (See our guide for the difference between financial advisers and financial mentors.)