Money Answers: how do I pick a financial adviser?

BusinessDesk investments editor Frances Cook responds to emails from readers each week to answer questions about money. Below you'll find her expert advice. Send your own questions to [email protected].

Hi Frances

I need a financial adviser. I’ve sold my house. The money is in the bank and I might not be buying again immediately.

How do I find a financial adviser whose advice I can trust, and who will offer me some good suggestions?

Does a financial adviser have to live near me? Do they work remotely now (like a lot of us), or are they better met in person so I can assess whether we can ‘work’ together?

S

Hi S,

Great question. Lots of personal finance journalism – this column included – comes with the disclaimer that it can’t be treated as individual financial advice, and you need to find an adviser for that.

The problem is that, when it comes to picking an adviser, it’s a high-stakes exercise. You’re looking for someone who, by definition, knows more about a subject than you do, which makes it hard to sort out who’s actually good, and who’s just good at talking a big game.

Happily, I have a whole vetting process ready to go to help you out.

The first thing to know is that most financial advice in New Zealand is split into three areas. There are mortgage advisers, investment advisers (including KiwiSaver), and insurance advisers. Some advisers are qualified in more than one of these areas, and some are even qualified in all three.

Have a think about what you would like to talk about, and look for someone who is qualified in that area. You can also look for someone who is qualified in the main area that you’re concerned about, and if they identify gaps in your finances in the other areas, they can refer you to someone they trust to help you with that.

Narrowing down options

To help you find someone, you could try the Financial Advice NZ website. It’s a professional membership organisation for NZ advisers, meaning that everyone there should be qualified and registered to work in NZ. They have a directory that lets you search for people by geographic area and financial specialty, which I think is helpful.

You can also try asking friends and family if they’ve used anyone who they found helpful. A personal recommendation can be great, although bear in mind that an approach that works for a friend may not work for you. Check that anyone you find through word of mouth is a registered adviser, through the Financial Services Providers Register.

I would also recommend giving someone a quick Google search before making the appointment. That should dredge up any news articles or posts that raise red flags. It’s amazing what can come up through Google.

Time to talk

Then you’ll want to have a chat before signing on with them officially. I would consider making a shortlist of at least three, and getting in touch to find out if you’re a good fit.

Most advisers will offer you the first meeting for free, and for good reason. You want to make sure that you’re a personality match, as well as a financial match.

A good adviser should talk to you about your life goals, your values, what freaks you out financially, and what makes you feel secure. They should not only ask you about this but really listen to the answer.

A good question to ask them is, ‘How have you helped other people in a similar situation to me?’.

It’s a giant red flag if you feel talked down to, if they don’t seem to understand your goals or if they make you feel bad for asking questions. Those are signs of a bad fit, and if you see any of these behaviours, I would move on to someone else straight away.

In terms of whether they need to live near you, I think that one comes down to personal preference. You may feel like you get a better read on someone when you’re in the same room and can have a better conversation with them. Or you might want to increase your options by looking further afield.

There are probably some advisers that only work with clients in person, but most that I’ve talked to are happy to take clients on remotely.

In fact, the last time I worked with a mortgage broker, it was with someone who came highly recommended but was out of my area. He was on Auckland’s North Shore and I was in Hamilton. 

No matter – he’s someone who I clicked with, who understood my goals and was very good at his job.

We had a couple of Zoom conversations, then some quicker chats over the phone, and before I knew it, he’d put together a plan I was very happy with.

There might be someone in your local area you think is great. Or you might find someone further away who works for you, and you don’t mind having Zoom and phone chats. This one is very much up to you.

How are they paid?

There are a few different ways advisers get paid, and it's important that you know how it works with whoever you choose.

Some work purely on commission, getting paid a bonus by a company if you sign up for their financial product. Others will charge you an upfront fee instead, which could be a flat fee or an hourly rate. Some will do a mix of both.

They legally need to tell you how they’ll be making their money, and if you’re at all unsure, ask them to walk you through it slowly.

The Financial Markets Authority has rules. Advisers need to work under a licensed provider and sign up to a professional code of conduct. They also have to disclose any conflicts of interest to you, including commissions they’re paid, and any limits on which companies or products they can advise you about.

All of this means that, in theory, they put your interests ahead of their own and don’t try to sell you something purely because they’ll get a fat commission on it.

In reality? My personal opinion is that it’s very difficult for people to put their self-interest aside and give truly unbiased advice.

Personally, I would prefer to pay for an adviser myself and be sure that they’re not even subconsciously swayed by the idea of any commissions they get from my financial choices.

That’s me, though, and you might be comfortable with a different model. Do what works for you.

A note on this is that if you’re working with a mortgage broker, it’s industry standard for them to be paid in commission by the bank and come free to you. So, it’s less of an issue in that area. 

You still, though, want to be clear and ask about any financial incentives in their commissions.

As a last footnote, for those who want financial advice but are worried about paying for it, some employers will help you with this. Some employee assistance programmes (EAP) give you free access to financial advisers and independent financial coaches. It’s worth checking!

Get more money info when you listen to Frances Cook's Cooking the Books podcast here:

Send questions to [email protected] if you want to be featured in the column. Emails should be about 200 words, and we won't publish your name. Unfortunately, Frances is not able to respond to every email received, or offer individual financial advice.

Information in this column is general in nature, and should not be taken as individual financial advice. Frances Cook and BusinessDesk are not responsible for any loss a reader may suffer.