Only 16 per cent of Kiwis use financial advisers, so trust is the number one issue. Good advice comes a close second and that is often questionable also.
Advice from family and friends
Family and friends eagerly give advice. But how do you know if the person advising you has actually done well? Cars can be leased and big houses mortgaged, making people look more successful.
Those who have done well will usually share what worked for them. However, for advice that will work the best for you, they would need to know the circumstances of your situation and your goals.
However, if they talk candidly about their mistakes, listen carefully.
Can you find an adviser you can trust?Yes, but you must follow a process:
Step one: small-town trust
Look for an adviser who has been around in a small town for a long time. In a city you will have to be a lot more circumspect.
Step two: ask your lawyer or accountant
Some will know an adviser, some won't. In the bad old days advisers paid money for referrals, but this rarely happens now. If in doubt, ask.
Step three: ask their clients
Don't expect a financial adviser to divulge their clients' contact details. Anyway, no advisers are going to give you the names of any unhappy clients, are they?
Step four: AFA or RFA
Authorised Financial Advisers (AFAs) are licensed to give advice on most categories of financial affairs and investment products. They have to comply with a 40-page code of conduct that requires them to disclose all fees and commissions, act with integrity, to put their client's interests first, and a lot more.
Registered Financial Advisers (RFAs) are only allowed to advise on basic products such as mortgages, life insurance and term deposits, or their employer's investment products. RFA's are not required to comply with the code above and do not have to disclose any commissions.
Step five: are they independent?
NZME financial writer and columnist Mary Holm has some excellent advice and resources for prospective clients seeking financial advice.
Visit her Mary Holm's website for a comprehensive list of independent advisers at: http:// www.maryholm.com/financialadvisers.php
Step six: experience
Experience is always a good thing. The 2009 global financial crisis taught those of us who went through it a thing or two.
However, a younger adviser, with an experienced mentor could be just fine, too.
Step seven: platforms
Many advisers use a custodial platform to hold your investments. Such platforms are very secure and so reduce your risk considerably. Aegis, for example, holds over $10 billion and is owned by ASB, with all the usual bank type audits.
Ponzi schemes cannot be run out of a platform and nor can any less-than-honest adviser (or their staff) can steal your money. Most advisers who use platforms don't have a trust account or handle their clients' money either (we don't).
Step eight: look for a rapport
Try and develop a rapport across the table with the adviser. If you are not satisfied, find someone else. And remember- there are no silly questions.
Step nine: they can't pick 'em
I have yet to find the person who can consistently and accurately forecast economic events, interest rates, exchange rates or picks stocks and shares.
An investment adviser can't either. If they claim they can, be very circumspect.
Step 10: be fair
Don't use financial hindsight anywhere in this process, it serves no purpose.
Last but not least: trust & integrity
These steps should help you in your search for a trustworthy adviser with secure money handling systems.
Keep looking; you must find the right one and when you do, it will pay off.
