David Chaplin: The role of advice (subsets) for KiwiSaver members

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As the NZ Herald reported on Monday academia and finance industry leaders gathered in Auckland this week to consider, among other big picture subjects, the "role of advice for KiwiSaver members".

I suspect only a tiny fraction of the 2 million plus KiwiSaver members have explicitly sought advice on their scheme decisions from qualified professionals.

Of course, plenty of members have undoubtedly hit up family, friends, and other acquaintances loosely associated with the finance industry for free KiwiSaver consulting services.

But, assuming you weren't happy with your dad's view on KiwiSaver managers or the guy in accounts wasn't very forthcoming, where can you source unbiased advice on the matter?

Well if you are looking for fully 'independent' advice as defined by the Authorised Financial Adviser (AFA) Code of Conduct on KiwiSaver, good luck: in mathematical terms, this is probably an 'empty set'.

However, other KiwiSaver advice subsets do exist: AFAs (with varying degrees of product bias); Registered Financial Advisers (RFAs), who can give limited, generic advice on KiwiSaver, and; Qualifying Financial Entity (QFE) advisers, some of who may be authorised by their employing institution to sell you the house product.

For the first time, the Financial Markets Authority (FMA) has quantified the number advisers in each of the above categories. In its Statement of Intent 2013-16, published earlier this month, the regulator lists the number of advisers as follows:

AFAs = 1,944

RFAs = 5,864

QFE advisers = 25,000

On the face of it, that looks as if KiwiSaver advice consumers have a lot of choice almost 33,000 advisers in the pool. That figure, though, doesn't stand up to much scrutiny.

It's impossible to tell how many of the 25,000 QFE advisers actually deal in KiwiSaver (the FMA was not able to clarify the figure for me) the category includes anything from travel agents who might dabble in holiday insurance to those Harvey Norman salespeople spruiking interest-free deals to bank advisers who offer the entire in-house product range. Naturally, a KiwiSaver-authorised QFE adviser will be selling you the home-brand only.

The 5,864 RFAs are only allowed to help clients with KiwiSaver questions in very restricted circumstances please take this brochure.

Which leaves the 1,944 AFAs (a figure now reduced to 1,902 since the FMA Statement of Intent was published). The majority of AFAs are in fact linked with product providers in one way or another, which doesn't mean they won't be able to help with your KiwiSaver questions but the solutions will probably be selected from a limited palette.

I estimate there are probably about 2-300 AFAs who might conceivably take a whole-of-market approach to KiwiSaver: and if you can find one, there's a good chance they have more profitable things to do than take you through every scheme option.