By October 2, 2018 No Comments

The Independent Financial Adviser.

When you’re unwell, you visit your doctor. You meet with a lawyer if you have a legal issue and when you need to borrow money, you go to your bank....

When you’re unwell, you visit your doctor. You meet with a lawyer if you have a legal issue and when you need to borrow money, you go to your bank. So when you need financial advice, you should seek it from an independent financial adviser.

A financial adviser is a professional who provides financial guidance to clients based on their needs and goals. In the NZ context, they typically provide clients with access to various investment products and services, planning or advice related to retirement, mortgages, estate planning, taxes and more.  Financial advisers are required to meet a fiduciary standard and must always place client interests ahead of their own.  They will take a holistic approach in making investment recommendations independent of outside influences and make recommendations based on reasonable discovery of the client’s investment objectives.  This means they need to know when you will need to use your money, and for what you will use it.  They must gather certain personal and financial data about you and take the time to understand your tolerance for risk, your expectations regarding investment returns, and your financial capacity to incur any investment losses.  An independent adviser will use this data to analyse any and all of your existing investments and make recommendations about what you should do in to the future.

An independent financial adviser will tell you what to invest in (securities, index or active funds and/or direct assets including real estate), what risks are associated with each investment, what expected return you might receive from your investment portfolio, what income if any your investments will generate and, among other things, what taxes you might incur.  All in the context of what’s best for you, your circumstances, investment objectives and attitude towards risk. And of course this is a constantly moving landscape that your adviser will monitor on an ongoing basis.

Providing solid financial advice takes a lot of work and there is much involved.  The term “legwork” could be used to describe the large amount of research, distillation and distribution of information and paperwork that needs to be undertaken and the time that this requires. To get great investment and wealth management results your financial adviser will do all of this for you as part of the service and for the fees you pay.   All good financial advisers will bring any relevant changes to their client’s attention, highlighting any value potential having analysed the prevailing options.  Yes, much of the “legwork” involves providing advice on suitable securities, investment products, funds, risk, asset allocation etc, but there is also a lot of “legwork” required to keep on top of everything that surrounds the advice provided.  Only close contact with your financial adviser can ensure your investment portfolio is always optimised as things change.

The truly independent financial adviser is impartial, unbiased and as unconflicted as possible.  They shouldn’t really be affiliated with a product manufacturer (usually a bank, insurance or investment company) as they would typically be paid to “sell” you one or more of their companies’ products.  And the independent financial adviser shouldn’t receive selling commissions of any sort, unless refunded in full to the client.  After all, if an adviser recommending a product to you either works for the company manufacturing that product and/or receives a commission for selling it to you, are you really sure that that is the best product for you, your circumstances and your objectives?  I don’t think so.  Just as you want a doctor that will provide an objective diagnosis and make the best recommendations for you, so too do you want an independent financial adviser with your best interests at heart.