DIY Investing vs Using a Financial Adviser in NZ

DIY Investing vs Using a Financial Adviser in New Zealand: A Complete Guide

Deciding whether to manage your own investments or hire a professional is one of the most important financial decisions you'll make. In New Zealand, both options have distinct advantages and drawbacks, and the right choice depends on your experience, time, and goals.

This guide will walk you through the key differences, pros and cons, costs, and practical steps to help you decide which path suits you best.

What is DIY Investing?

DIY investing means you take full control of your investment portfolio. You choose the assets (shares, ETFs, managed funds, property, or bonds), decide when to buy and sell, and manage your own risk. In New Zealand, popular platforms for DIY investors include Sharesies, Hatch, InvestNow, and Smartshares.

You'll need to research companies, understand market trends, and stay on top of tax obligations like the FIF (Foreign Investment Fund) rules and PIE (Portfolio Investment Entity) tax treatment.

What is Using a Financial Adviser?

A financial adviser is a licensed professional who provides personalised investment advice. They assess your financial situation, risk tolerance, and goals, then recommend a portfolio or strategy. In New Zealand, all financial advisers must be registered on the Financial Markets Authority (FMA) register and meet Code of Professional Conduct standards.

Advisers can be fee-only (charging hourly or fixed fees) or commission-based (earning from product providers). Some offer ongoing portfolio management services.

Key Differences Between DIY Investing and Using a Financial Adviser

Factor DIY Investing Financial Adviser
Control Full control over decisions Adviser recommends, you decide
Time commitment High — research, monitoring, rebalancing Low — adviser handles most tasks
Cost Low — platform fees only (0.5%–1% p.a.) Higher — advice fees (1%–2% p.a. or hourly rates)
Expertise Requires self-education Professional knowledge and experience
Tax handling You manage (PIE, FIF, RWT) Adviser may assist or refer
Emotional support None — you ride market volatility alone Adviser provides guidance during downturns

Pros and Cons of DIY Investing

Pros

  • Lower fees: Platform fees are typically 0.5%–1% per year, with no advice charges.
  • Full control: You choose every investment and can react quickly to opportunities.
  • Flexibility: Start with as little as $50 on platforms like Sharesies.
  • Learning opportunity: You build financial knowledge and confidence over time.

Cons

  • Time-intensive: Researching companies and monitoring markets takes hours each week.
  • Emotional risk: Panic selling during downturns is common without professional guidance.
  • Tax complexity: NZ tax rules for foreign investments (FIF) and PIE funds can be confusing.
  • Limited diversification: Beginners often concentrate in a few stocks, increasing risk.

Pros and Cons of Using a Financial Adviser

Pros

  • Personalised strategy: Advice tailored to your goals, risk tolerance, and tax situation.
  • Time savings: Adviser handles research, rebalancing, and paperwork.
  • Behavioural coaching: Helps you stay disciplined during market volatility.
  • Access to exclusive products: Some managed funds or insurance products are only available through advisers.

Cons

  • Higher cost: Annual advice fees range from 1%–2% of invested assets, plus ongoing service fees.
  • Less control: You should follow the adviser's recommendations, though you can always say no.
  • Potential conflicts: Commission-based advisers may recommend products with higher fees.
  • Minimum investment: Many advisers require $50,000–$100,000 or more to take you on.

Cost Comparison: DIY vs Adviser

Cost type DIY Investing Financial Adviser
Platform/management fee 0.5%–1% p.a. 0.5%–1% p.a. (fund fees)
Advice fee $0 $1,500–$5,000 initial + 0.5%–1% p.a. ongoing
Transaction costs $0–$10 per trade Often included in advice fee
Total annual cost (on $100k) $500–$1,000 $2,000–$4,000

Over 20 years, the compounding effect of higher fees can reduce your returns significantly. For example, a 1% difference in annual fees on $100,000 could cost you over $30,000 in lost growth (assuming 6% returns).

Who Should Choose DIY Investing?

  • You have at least 2–3 hours per week to research and monitor investments.
  • You're comfortable with basic tax rules (PIE, FIF) or willing to learn.
  • You can stay disciplined during market downturns without panicking.
  • Your investment portfolio is under $200,000 (fees matter less at this level).
  • You want to keep costs as low as possible.

Who Should Use a Financial Adviser?

  • You have a complex financial situation (multiple income streams, trusts, or business interests).
  • You lack the time or interest to manage investments actively.
  • You need help with tax planning, retirement forecasting, or estate planning.
  • You have a large portfolio ($200,000+) where professional advice can add value.
  • You want emotional support and accountability.

Step-by-Step Guide: How to Decide

Step 1: Assess your investment knowledge

Take a free online course from NZX or the website. If you can explain the difference between a share, a bond, and an ETF, you're ready for DIY basics. If not, consider an adviser for initial guidance.

Step 2: Calculate your time budget

DIY investing requires at least 1–2 hours per month for rebalancing and review. If you can't commit to that, an adviser may be a better value.

Step 3: Compare costs

Use a fee calculator (many NZ platforms offer these) to estimate total annual costs for DIY vs adviser. Remember that advice fees are tax-deductible if they relate to investment income.

Step 4: Consider a hybrid approach

Many Kiwis start with DIY for simple investments (like KiwiSaver or a Smartshares fund) and use a fee-only adviser for a one-off financial plan. This gives you professional input without ongoing costs.

Step 5: Check the FMA register

If you choose an adviser, verify they are registered on the FMA's financial adviser register. Ask about their fee structure and any conflicts of interest.

Tips for DIY Investors

  • Start with low-cost index funds (like Smartshares NZ Top 50) to build a core portfolio.
  • Use dollar-cost averaging — invest a fixed amount monthly to reduce timing risk.
  • Set up automatic contributions to stay disciplined.
  • Keep a simple portfolio of 3–5 ETFs or managed funds for diversification.
  • Use a tax calculator for FIF investments to avoid surprises at year-end.

Tips for Choosing a Financial Adviser

  • Ask for a clear fee schedule in writing before engaging.
  • Prefer fee-only advisers who don't earn commissions on products.
  • Check their experience with your situation (e.g., property investors, retirees, or business owners).
  • Request references from current clients.
  • Ensure they provide a written Statement of Advice (SOA) with clear recommendations.

Verdict

There's no one-size-fits-all answer. DIY investing works well if you have the time, interest, and discipline to manage your own portfolio. Using a financial adviser makes sense if your situation is complex, your portfolio is large, or you want professional oversight and emotional support.

Many New Zealand investors find a middle ground: they use a fee-only adviser for a financial plan, then manage their own investments with that roadmap. This approach balances cost, control, and expertise.

Remember, the best strategy is the one you can stick with through market ups and downs. If you're likely to panic-sell during a downturn, the cost of an adviser may be money well spent.