“Wow” said I “how did you work that out?”
He replied “you have been in business in a small town for 20 years, and you’re still here.”
Well, that did my ego some good, I had a wee chuckle to myself, and then I thought about what he said. The key word were “small town” of course. In a small town people tend to know everyone, or someone who knows someone knows that guy, so a local business person or tradesman with a bad reputation will soon be gone.
In a city less-than-trustworthy people seem to be able to find new victims again and again and keep going (watch Fair Go).
Can you find an adviser you can trust?
Can you get good advice?
Only 16% of Kiwis use a financial adviser, and we know that trust, or lack of it, is the number one issue. Good advice comes a close second, and that is often questioned too.
Advice from family and friends
A lot of people take advice from family and friends. However it is hard to really know if the person giving you the advice has actually done well because nice cars can be leased, big houses can be mortgaged, so people can easily look successful but may not be.
Even if they have done well, people will usually tell you what worked for them. They need to interview you in depth to find out your current situation and what you’re trying to achieve, and if they don’t, their advice may be very wide off the mark.
But if someone is candidly telling you about their mistakes, then listen up.
Can you find an adviser you can trust?
Yes you can, buy you must follow a process.
Step one - small town trust
If you are looking for an adviser, find one 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 2 - ask your lawyer or accountant
Some will know of one, and some won’t. In the bad old days, a few were paid money by the adviser for referrals – this rarely happens now, but if in doubt, ask.
Step 3 - ask their clients
Don’t ask a financial adviser for the names of some of their clients that you can call and ask. No adviser is going to give you the names any unhappy clients, is he/she?
Step 4 – AFA or RFA
Authorised financial advisers (AFA) are licenced to give advice on most categories of financial affairs and investment products. They are heavily regulated and have to comply with a 40 page code of conduct that includes disclosure of all fees and commissions, must act with integrity, and are required to put the clients’ interests first.
Registered financial advisers (RFA) are usually less qualified and only able to give advice on basic products such as mortgages, life insurance, term deposits. They can give investment advice but only on their employer’s investment products. They are not required to comply with the code (above) and do not have to disclose any commissions.
Footnote - go to YouTube and look up “banking bad four corners” to see the problems that non-disclosure and commissions can cause.
Step 5- Independent?
Look up Mary Holm’s website for independent advisers at;
Step 6 - experience
Experience is always a good thing. Anyone who went through the 2009 global financial crisis learnt a thing or two (I hope).
But younger people often have something to add too. A younger adviser well mentored by an older adviser might be just fine.
Step 7 - platforms
Many advisers use a custodial platform to hold your investments such as Aegis, who hold over $10 billion and are owned by ASB. These platforms are very secure and so reduce your risks considerably.
E.g. no one can run a Ponzi scheme out of a platform, and no less-than-honest adviser (or their staff) can steal your money either.
Most adviser who use platforms don’t handle their clients’ money at all (we don’t).
Step 8 look for a rapport
You should see if you can develop a rapport across the table with the adviser. If you are not satisfied, try someone else. And remember no question is a silly question.
Step 9 – they can’t pick ‘me
I have yet to find the person who can consistently and accurately forecast economic events, interest rates, exchange rates or pick 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 handing systems. You must find the right one - keep looking, it will pay off.
That’s the “choosing” process dealt with as much as we can.
Next week we will look at “good advice” – can you find it?
Supplied by Alan Clarke, financial & retirement adviser, & author.
His 2nd book “The Great NZ Work, Money & Retirement Puzzle” is now available on line at www.acfs.co.nz
Alan is an independent authorised financial adviser (AFA) FSP26532
His disclosure statement is available on request and free of charge.