Your money: For financial success seek out the right advice

Ever thought of revealing your financial affairs and aspirations to a stranger? For most New Zealanders the answer is probably no.

One thing which distinguishes us from Americans is that we aren't that open about talking about our money.

However, talking to a financial planner can be a good idea. Research from the US says that people who seek professional money management advice from a financial planner will do better than those who don't.

The value of good advice is easy to underline in times like this when markets around the world are continuing with their - apparently never-ending - roller coaster ride.

In these times the broad concepts of financial planning, which include diversification and protecting yourself against risk, are vital for maintaining an investor's long term financial health.

Financial planners are often portrayed as people who sell you a bunch of investments.

But a number of influences mean a planner's role is metamorphosing into something much broader.

Planners these days are moving more into developing relationships with their clients and helping them on a broader front.

For instance there is a trend for advisers to take a more "holistic" approach in their advising. This may well include providing a range of other services as well as investment - from mortgages, to insurance, to estate planning.

Research from the US indicates that people do not go to advisers purely for increased investment performance. Instead, they are paying advisers to provide them with an overall approach towards achieving their long-term financial goals and they are also paying to develop a relationship with that adviser.

Nowadays an adviser will help clients through providing advice in the areas of tax, ownership structures, helping establish some goals and developing a savings discipline, estate planning, asset protection and risk management.

The need to seek professional financial advice is growing as the world becomes more global in its approach to investment and the Government changes the environment for savers.

With policy changes such as the 39 per cent top tax rate, the recent introduction of the superannuation fund withdrawal tax, changes to the way trusts operate and the likelihood of some form of tax incentive for long term savings, the need for professional advice has never been stronger.

Retirement Commissioner Colin Blair says in his office's latest annual report that the best result he could see from his educational campaign is that "more New Zealanders reach their planned retirement age feeling that they have made good choices between spending and saving during their working years".

"Generally that will only happen as a result of good long term financial planning," he says.

Where do you go for advice?

There are three main associations that represent financial advisers. The largest is the Financial Planners and Insurance Advisers Association (FPIA). A smaller body representing advisers on the investment side is the Society of Independent Financial Advisers (SIFA).

On the insurance side of the business is the Life Brokers Association. While its members are mainly involved in insurance, a number of them also operate in the investment side of the business.

Listings of advisers can be found on the Internet too.

Good Returns (www.goodreturns.co.nz) runs a Find-An-Adviser page, while IPAC (www.ipac.co.nz) has a page which lists advisers. Companies such as AMP (www.amp.co.nz) lists all its advisers nationwide and organisations such as Waltus (www.waltus.co.nz) list advisers who sell its products.

The Office of the Retirement Commissioner can also help with information on choosing an adviser and the questions you should ask, either through its website (www.retirement.org.nz) or by calling 0800 45 65 85.

What constitutes a good adviser?

Two of the factors which make a good adviser are professionalism and personality. You want someone you can trust and get along with.

What does an adviser charge?

There are various different ways of charging. Some advisers take a commission on all investments placed, some charge a fee and others do a combination of the two.

While the advisory industry has traditionally been commissioned-based it is moving towards charging a fee for service.

There is a wide range of fees charged. Ultimately, it's not so much the size that matters, but whether you, as the client, feel you are getting value.

One of the most important things to find out is what all the fees are.

Under the disclosure regulations advisers are legally required to disclose how they handle your money, and whether they have had any dishonesty convictions in the past five years.

They must also disclose conflicts of interest, qualifications and experience and whether they have any pecuniary interest which is likely to influence their recommendations. Ask your planner for this information, which they are obliged to provide.

* Philip Macalister is the editor of online money management magazine Good Returns. Good Returns provides news on managed funds, mortgages, insurance, superannuation and financial planning..