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Seven Questions to Ask a Financial Adviser

Q1. Do you receive research from a recognised research company?

Research should be an important facet in the offering of financial advice. Internationally, research is compulsory, this is not the case in New Zealand. 

Does the investment adviser follow an approved asset allocation model and do they document deviations from this procedure?

Does the Financial Adviser use independent research and can back up their advice for insurances that they recommend?

Q2. How experienced and qualified is the adviser? 

You have the right to request from any investment adviser a written disclosure statement stating his, or her experience and qualifications to give advice. We recommend you ask for the secondary disclosure statement which needs to list all areas of income. That document will tell you;

  • Whether the adviser gives advice only about particular types of investments; and
  • Whether the advice is limited to the investments offered by one or more particular financial organisations; and
  • Whether the adviser will receive a commission or other benefit from advising you.
  • The maximum brokerages, commissions and trail commissions that could be received.

You are strongly encouraged to request that statement. In accordance with Section 22 of the Financial Advisers Act 2008, a financial adviser must make disclosure before providing a personalised service to a retail client.

In addition it must state:

  • If an investment adviser has any conviction for dishonesty, or been adjudged bankrupt, he or she must tell you this in writing; and
  • If an investment adviser receives any money or assets on your behalf, he or she must tell you in writing the methods employed for this purpose.

Tell the adviser what the purpose of your investment is. This is important because different investments are suitable for different purposes.

Q3. What organisations do they belong to?

Do they belong to industry recognised organisations such as the Institute of Financial Advisers (IFA). A requirement for continuing to belong to an organisation such as this is continuing education requirements, complying with their code of ethics and professional conduct.

Q4. Are their practices and procedures independently audited?

Don't just go on the adviser's say so. Can they show that their advice is independently audited against "industry best practice standards".

Can you view your investment through an audited web site?

Do they use a trust account?

Q5. What range of Services can the adviser cover?

Do they give comprehensive advice covering investments, insurance, retirement, asset protection and estate planning, and taxation advice?

Q6. What happens to my money?

Your money should go directly from your bank account to the bank, financial institution, or fund manager you are saving or investing with. If an adviser tells you that your money needs to be paid to him/her, or their company, ask why. There should be few cases where an financial adviser needs to take custody of your money.

Q7. Do they have an on-going client care program?

How will you get, and how often will you get, on-going advice after your initial investment?

Can you view your investment portfolio from their web site?