You can get advice at financial institutions like banks, or brokers, or from an independent adviser. Either way, our checklist should help.

At a first meeting, a good financial adviser will not only give you the information they have to by law, but will also tell you about their qualifications, experience, organisation, fees, how they get paid, and any conflicts of interest they may have.

Write down the adviser's answers to these questions. If he or she cannot answer the questions on the spot, you could leave a copy of the Checklist and ask them to get back to you with the answers.

1. What an adviser has to tell you by law

Personal information - if in the past five years they have:

• Had any convictions involving dishonesty (eg. fraud)
• Been made bankrupt
• Been prohibited from taking part in the management of a company or business.

What happens to your money (fees and investment money):

• How you will make payments to them
• Whether the money will be held in trust by the adviser
• What records are kept, whether you will have access to those records, and under what terms
• Whether the adviser's accounts will be audited, and if so, by whom
• Whether your money can be used by the adviser, either for the adviser's own benefit, or for the benefit of any other person.

Getting this information is one thing. Being satisfied that your money is safe is a different story.

In most circumstances your money should be able to go directly from your bank account to the bank, fund manager or financial institution you are saving or investing with.

If an adviser tells you that your money needs to be paid to him or her ask why. There should be very few cases where an independent financial adviser needs to take custody of your money.

Members of the Stock Exchange, who act as brokers between buyers and sellers do need to handle your money.

2. Membership of any of the following professional organisations?

• Institute of Chartered Accountants of New Zealand
• New Zealand Stock Exchange
• Institute of Financial Advisers

Membership is no guarantee of good advice, but members have to qualify, adhere to a professional code of conduct, and you can complain to the organisation if you are dissatisfied. It's a good first place to start.

3. Experience and qualifications

• What are your qualifications for giving financial advice?
• When did you get those qualifications?
• How up-to-date are your qualifications?
• What experience do you have as a financial adviser?

4. What's in it for the adviser?

• Do you, or anyone associated with you, have a financial interest in giving me this advice? If so, what is that interest?
• Will you receive any money from anyone other than me in connection with the advice you are giving me?

5. What are the limitations of the advice you are getting?

• What types of products do you give advice about?
• Are there any restrictions relating to the advice that you can give me?
• What products can't you advise me about?

It's important to understand how comprehensive is the advice that you are getting. It might be that the adviser can tell you only about life insurance or savings products, and only products from a certain company. You might need to consult someone else as well to get the whole picture, for example, advice on whether paying off your mortgage faster is a better option than starting a savings scheme. Normally, it's better to reduce debt than buy a savings product.

6. Does the adviser favour certain organisations?

• What organisations do you have a relationship with, and what is the nature of that relationship?

Be very specific about this - for example, if you are interested in life insurance ask these questions:

• Can you arrange life insurance for me with any life insurance company in New Zealand?
• If not, which insurance companies, can't you use?
• If I take out $100,000 of life insurance with the company you recommend, how much do you get paid: when I take it out, and each year I have the insurance?

If you are interested in a savings scheme, ask these specific questions:

• If I give you $10,000 to invest in the product you recommend and save $1,000 a year, how much will you get paid: when I take out the investment, and each year I have the investment?
• Remember, the adviser will probably be paid with your money, so you're entitled to ask and be told how much. Even if the adviser is paid by the company your money is invested with, the commissions essentially come from expenses charged by the company to manage your money.

For more information, visit www.sorted.org.nz

Be first to comment this article

Only registered users can write comments.

Please login or register.