Getting advice

Former FMA Investor Capability Manager Gillian Boyes talks about some of the times in your life where it might be a good idea to seek financial advice.

Financial advice is regulated by the FMA. Those providing financial advice are required to be licensed by the FMA as a Financial Advice Provider or operate under a Financial Service Provider licence issued by the FMA.  It’s our job to ensure that they are following rules, including putting your interests first. 

Financial Advice Providers can recommend or provide opinions on financial products such as KiwiSaver, mortgages, insurance, shares, or cash investments. This is different from just describing how financial products work, which isn’t financial advice.

Some advisers might be able to give advice on a wide range of financial products, while others may advise on certain products only – such as mortgages or insurance.

Advisers must have a licence issued by the FMA or be working for an approved business that has one.

They must also follow the Code of Professional Conduct for Financial Advice Services which outlines the standards of conduct, client care, competence, knowledge, and skill needed to provide financial advice.

They must have the right competence, knowledge and skill and able to provide information of their dealings with customers to the FMA, which collects data, and monitors compliance and outcomes through ongoing supervision.

The FMA monitors advisers and also takes enforcement action when needed. The Ministry of Business, Innovation and Employment and the Companies Office also help with oversight of the financial advice regime and the Financial Service Providers Register (FSPR).

Financial Advice Providers can include:

• Personal financial planners and investment advisers
• Mortgage advisers (sometimes referred to as mortgage brokers)
• Insurance advisers (sometimes referred to as insurance brokers)
• Staff at insurers and banks who provide financial advice

Digital or 'robo-advice' is automated advice generated by a computer program using algorithms, based on the information you provide. Only a few providers currently offer digital advice in NZ but it’s an area that’s growing internationally.

All advisers must have their own Financial Advice Provider licence or be covered by an entity that has one. 

All licensed Financial Advice Providers must comply with new duties that ensure they:

• Have the right competence, knowledge and skill
• Put your interests first
• Properly explain what kind of advice they’re able to give
• Explain how they’re paid

Advisers must tell you how they are paid.

An adviser who provides financial advice has an obligation to take reasonable steps to disclose certain information, including all fees and costs associated with that advice.

Generally, advisers are paid for advice in two ways:

Directly – via a fee for the service the adviser has provided, or:

Indirectly – the adviser is paid a commission from the providers whose product you sign up to.  You pay nothing upfront for this, but you should know this and recognise that you may be offered a limited choice of options from only one provider.

You might also pay an ongoing fee – Some advisers are paid a “trail commission” where money is paid to them by a supplier of a product, for the duration of the relationship.

Research shows that most consumers prefer to have costs clearly written down so don’t be afraid to ask the adviser to do this.

Finally, if you are unclear on anything, ask. Advisers should present any fees and costs associated with the advice in a clear, concise and effective manner.