Money Answers: How do I find a financial adviser who understands wealth creation?

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

Hey, Frances,

Really appreciate your podcast, and have a question: Got any recommendations for a financial adviser? 

Obviously, I can find them on Google etc, but how do I know if they’re any good? What questions should I ask? 

I don’t take recommendations from friends and family, because they aren’t doing that great financially. 

I did hire a financial adviser years ago but didn’t get much out of it. They just looked at my plans and said they were very good. They also offered me a job. 

Also, I am ambitious, and I want one who specialises in wealth creation, but when I look up those types, you have to have a level of assets and income I don’t have – yet! 

Cheers,

H

Hi, H,

I love the tone of ambition in your letter. It’s quite funny that you tried to find a financial adviser and were offered a job instead, but I’m not that surprised. You sound like a go-getter!

I certainly do have some tips for finding a financial adviser. My first tip, however, is to start with yourself. 

What do you hope to achieve by hiring a financial adviser? What do you want them to do for you that you can’t do for yourself? 

I say this because you mentioned the adviser you consulted years ago told you your plans were already very good. You might be someone who is quite interested in the money world and already working on things like investing. You don’t need to have an adviser for that. 

They can help, for sure. But there are plenty of DIY investors out there building their own wealth. 

I think an adviser really shines when you’re trying to figure out options. Such as property versus shares. Or if you have a big lump sum and want to make sure you put it into the right place. Or if you need guidance on quite technical products, like insurance. Or if you’re worried that you might get emotional, and want an adviser to help you stick to your plans when inevitable market dips come along. 

You can also have quite different relationships with different types of advisers. Some you might talk to regularly as you build up investments, and they guide you. Others you might touch base with once a year to ensure you’re still on track. And then there are those who might help you set up a plan and then turn you loose to implement it yourself. 

You also mention that you’d like someone who specialises in wealth creation. Really, any financial adviser should be focused on that. 

Sure, some will charge big bucks and market themselves particularly for that purpose. But any financial adviser should be able to help you on that front. 

So, that’s the first point. What do you want from this exercise? What can a financial adviser help you with that you can’t do yourself? And how often would you like to be in contact with them? 

This will help you home in on the types of advisers who will be a good fit for you.

After that, I’ve got some tips to help you pick someone out. 

The specialties

An important one to know is that most financial advice in New Zealand is split into three specialties.

There are mortgage advisers, investment advisers (including on KiwiSaver), and insurance advisers. 

You mentioned wealth creation, so you’re probably looking for an investment adviser and possibly also a mortgage adviser. 

Be aware that some advisers are qualified in more than one of these areas, and some are even qualified in all three. 

So you could look for investment advisers in the first instance, or possibly someone who’s qualified in investments and mortgages. 

You could also look for someone who’s qualified in the main area you’re interested in (probably investments), and if they see any gaps in what they want to address in your finances, they can refer you to a good mortgage or insurance adviser, maybe even an accountant, to help you out. 

Starting cold

It's fair enough that you don't want to ask for recommendations from those around you if they're not in a financial situation that you want for yourself. 

If you’re starting to look for someone from scratch, I like the Financial Advice NZ website. 

Only professional, qualified, registered advisers can be listed there. Those are all incredibly important points. Plenty of cowboys are out there claiming they know more than they do, and you want to avoid them. 

Financial Advice NZ also has a directory that lets you search for people by geographic area and financial specialty, which makes it easier.  

If you find someone through other means, such as a recommendation from a friend, double-check that the person is a registered adviser by putting their name into the Financial Service Providers Register.

Do not work with someone who is not registered as a financial adviser within NZ. Down that road, only pain lies. 

This is especially important if you find someone who is overseas. Even if they are legitimate and qualified for the role, other countries have different rules and different investing incentives. 

If anything goes wrong with an overseas adviser, there is very little that even the police can do to get your money back. 

How’s the fit

Use these tactics to make a shortlist of at least three options that you like the look of. Then, it’s time to get in touch and see if they’re the right adviser for you to work with. 

Most advisers will offer you the first meeting for free, and for good reason. You have to know if you’re a good financial match, yes, but also a good personality match. 

A green flag with a financial adviser is if they ask about your financial goals, other life goals, your values, anything that financially freaks you out, and what helps you feel secure. 

You should feel as though they’re really listening to your answers. 

A big red flag is if they talk down to you, make you feel bad for asking certain questions, or don’t seem to understand your goals. They may be good at their job, but that doesn’t mean they’re the right fit for you. 

A question I like to trot out is, “How have you helped other people in a similar situation to mine?”

This should show you their experience and also if you like the sound of their tactics. A concrete example can be very revealing.

How are they paid?

Another thing I want you to pay close attention to is how your adviser is paid. 

Some work on commission, getting paid a bonus by a company if you sign up for their financial product. 

Others will have a flat fee, or hourly rate, that they charge you for their time, no matter what investing decision you make. 

Other advisers do a mix of both. 

The rules set by the Financial Markets Authority are that advisers work under a licensed provider and have a professional code of conduct. They need to disclose those to you. 

They must also disclose any possible conflicts of interest, including commissions and any limits on which companies or products they can advise you about. Make sure you’re super clear on all of those, as it’s important. 

In theory, no matter how they’re paid, they’re meant to put your interests ahead of their own. As in, they’re not supposed to sell you a certain investment just because they get the biggest commission on that one.

In reality … look, I think human nature makes it hard for us on this one. I think it’s very, very difficult to put self-interest aside and give truly unbiased advice when there’s a commission on the table. 

My personal position is that I would rather pay a set rate for an adviser and be sure that they’re not even subconsciously swayed by a commission on particular investments I make. 

Up to you, though. You may feel differently. 

If you’re worried about paying upfront, it’s possible you can get help from your employer. Some employee assistance programmes (EAP) give you free access to financial advisers and financial coaches. Worth asking. 

Do note that it’s different for mortgage advisers. It’s industry standard for them to be paid by commission from the banks and for you to pay nothing. 

Still, just ask about those commissions, though, and ensure you’re clear on what they are. 

Best of luck. I’m sure you’ll be speeding along your wealth-creation journey in no time. 

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.