Financial advisers

Financial advice: the basics

Financial advisers provide advice to individuals and small companies to help them to make decisions in areas such as:

• Investments
• Loans, credit and debt reduction
• Retirement planning
• Insurance
• Estate planning (wills and trusts)
• Cash management

Getting financial advice can help you to make good investment decisions and to reach your financial goals. It is important when choosing a financial adviser to ensure that you will receive advice suited to your personal situation and lifestyle.

What is a financial adviser?

All financial advisers are required by law to be on the Financial Services Providers Register.

Visit the Financial Services Providers Register.

Under the Financial Advisers Act there are two types of financial adviser: a Registered Financial Adviser or an Authorised Financial Adviser. The services they can provide depend on what type of adviser they are.

Registered Financial Adviser

Registered Financial Advisers are required to be registered but do not need to be authorised by the Securities Commission because they only provide limited services. They must belong to a disputes resolution scheme.

You can go to a registered financial adviser for advice about simple financial products such as:

• bank term deposits
• bonus bonds
• call debt securities
• call building society shares
• call credit union shares
• shares in co-operative companies
• consumer credit contracts
• a unit in a cash or term portfolio investment entity
• insurance contracts, (except investment-linked insurance contracts)
• life insurance policies** issued before 1 January 2009.

 Authorised Financial Adviser

Authorised financial advisers must be registered and belong to a disputes resolution scheme and also be licensed by the Securities Commission. Only authorised financial advisers can give advice about complex financial products such as:

• securities
• land investment products
• futures contracts
• investment-linked insurance contracts.

An authorised financial adviser is required to attain a minimum level of competence set by the Securities Commission and must comply with the Code of Professional Conduct which sets minimum standards of client care and ethical behaviour.

What to ask before deciding on an adviser

Do you feel comfortable discussing your financial goals with the adviser?

The purpose of a financial adviser is to provide a solution that is right for you. You need to be open and honest with them about your income, debts, lifestyle and goals, to get the best solution. So choose someone that you trust and who makes you feel comfortable.

How will the financial adviser decide what you need? How long will he/she spend on this?

It is important to have a financial solution that suits you. Look for a financial adviser who takes the time to understand what your needs are. You may need to take time to speak to a number of advisers until you feel confident that you are being understood.

What qualifications does this person have?

Find out what experience or qualifications your adviser has. The number of years experience the adviser has, membership of industry groups and formal qualifications can all indicate the quality of the financial adviser.

Does the organisation have a good reputation?

A well known and reputable organisation is usually less risky and more likely to provide competent financial advice.

How independent is the adviser?

Find out how the adviser gets paid. This can influence what they recommend to you. Some advisers get paid commission from the investments they recommend. Some advisers have a limited number of financial products that they can recommend. This would mean that the adviser was not entirely independent.

If you decide to chose a financial adviser who is not yet registered on the Financial Services Providers Register it is even more important to ask the above questions. This is because the Companies Office and Securities Commission won’t have checked these areas yet.

Your rights with financial advice

What a financial adviser must tell you

Your financial adviser must give you a two disclosure statements before the service is provided (or if not practicable before, as soon as practicable after the service is provided) which tells you about the adviser and about the products.

In their first disclosure statement a financial adviser must tell you:

• the name and contact details of the adviser
• the date on which the statement was prepared
• the services that the adviser is authorised to provide – simple or complex
• how the advisor gets paid for the services
• any bankruptcies, admissions to the no asset procedure, disciplinary proceeding and criminal convictions, or other adverse finding against the adviser, in the last 5 years
• what you can do if you have a problem with the adviser's service, including information about the adviser's internal complaints procedure, and which dispute resolution scheme you can go to
• how the adviser is regulated by the Government

In a secondary disclosure statement a financial adviser must tell you:

• the types of financial adviser services to be provided
• any limitations on those services
• the fees you will pay
• any relevant conflicts of interest that the financial adviser has
• the details of how the adviser gets paid.

Financial Services Act

A person or company has breached the Act if they:

• don’t exercise care, diligence and skill
• provide financial services but are not allowed to do so
• don’t tell you the required information
• behave misleadingly or deceptively.

Authorised Financial Adviser must follow the Code of Professional Conduct. This includes:

• putting client's interests first
• acting with integrity
• not implying they are independent when they are not.

Consumer Guarantees Act

Financial Services are covered by the Consumer Guarantees Act.

Find out your rights with services.

Fair Trading Act

Financial services are also covered by the Fair Trading Act. This means the trader must not mislead consumers, give them false information, or use unfair trading practices.

Got a problem with a financial adviser?

All financial advisers must belong to a financial services disputes resolution service. If you can't resolve your problem directly with the company you can contact the financial dispute resolution service.

Find out more about going to a financial services disputes resolution service.

If a company or a person breaches the Financial Advisers Act, you can complain to the Securities Commission/Financial Market Authority.

Visit the Securities Commission website.