Questions to Ask Before Hiring a Financial Adviser

Choosing a financial adviser is one of the most important decisions you’ll make for your financial future. In New Zealand, the right adviser can help you build wealth, manage risk, and plan for retirement. But how do you know if they’re the right fit? Asking the right questions upfront can save you time, money, and potential disappointment.

This guide walks you through the key questions to ask before hiring a financial adviser. Use these as a checklist when you meet with potential advisers.

Step 1: Check Their Qualifications and Registration

In New Zealand, financial advisers must be registered on the Financial Service Providers Register (FSPR). They also need to meet competence and conduct standards set by the Financial Markets Authority (FMA).

  • Are you registered on the FSPR? – Confirm their registration number and check it online at companiesoffice.govt.nz.
  • What qualifications do you hold? – Look for a New Zealand Certificate in Financial Services (Level 5) or higher. Some advisers have degrees in finance or commerce.
  • Are you a member of a professional body? – Membership in organisations like the Institute of Financial Advisers (IFA) or Financial Advice New Zealand (FANZ) indicates a commitment to ethical standards.

Step 2: Understand Their Services and Specialisation

Not all advisers offer the same services. Some focus on investments, others on insurance, mortgages, or retirement planning. Make sure their expertise matches your needs.

  • What types of advice do you provide? – Ask if they cover investing, KiwiSaver, insurance, mortgages, or all of the above.
  • Do you specialise in a particular area? – For example, some advisers focus on first-home buyers, while others work with high-net-worth clients.
  • Can you provide a sample of your advice process? – A good adviser will explain how they assess your situation, develop a plan, and review it over time.

Step 3: Clarify How They Are Paid

Understanding fees is critical. Advisers in New Zealand can be paid in different ways, and the structure affects the advice you receive.

Fee Type How It Works Pros Cons
Fee-only You pay a flat fee or hourly rate for advice. No commissions from product providers. Transparent, no conflict of interest. Can be more expensive upfront.
Commission-based Adviser earns a commission from products they sell (e.g., insurance, KiwiSaver funds). No upfront cost to you. May encourage product recommendations that benefit the adviser.
Hybrid Combination of fees and commissions. Flexible for different services. Can be confusing to compare costs.
  • How much do you charge for an initial consultation? – Many offer a free first meeting.
  • What ongoing fees can I expect? – Ask about annual review fees or ongoing advice charges.
  • Do you receive commissions or bonuses from product providers? – They must disclose this. If they do, ask how it might influence their recommendations.

Step 4: Ask About Their Investment Philosophy

A good adviser will have a clear, consistent approach to investing. This helps you understand how they’ll manage your money.

  • What is your investment philosophy? – Do they favour active management (picking stocks) or passive management (low-cost index funds)? Both have merits.
  • How do you determine risk tolerance? – They should use a formal risk profiling tool, not just a casual chat.
  • What types of investments do you typically recommend? – Look for diversification across asset classes like shares, bonds, property, and cash. Be wary if they push a single product.

Step 5: Understand Their Disclosure Obligations

Under the Financial Markets Conduct Act 2013, advisers must provide a disclosure statement. This document explains their services, fees, conflicts of interest, and complaints process.

  • Can I have a copy of your disclosure statement? – They must give you this before you sign anything.
  • Do you have any conflicts of interest? – For example, if they also work for a bank or insurance company, ask how that affects their advice.
  • What is your complaints process? – They should have an internal process and be part of an external dispute resolution scheme (e.g., Financial Services Complaints Ltd).

Step 6: Gauge Their Communication Style

You need to feel comfortable asking questions and sharing personal details. A good adviser will listen more than they talk.

  • How often will we meet or communicate? – Annual reviews are standard, but you may want more frequent check-ins.
  • How do you prefer to communicate? – In person, by phone, via email, or through a client portal?
  • Will I have one main contact person? – Some firms assign a team, which can be less personal.

Step 7: Ask for References and Check Their Track Record

Don’t rely solely on the adviser’s website testimonials. Ask for independent references.

  • Can you provide client references? – Contact a couple of their current clients to ask about their experience.
  • Have you ever been disciplined by the FMA or a professional body? – Check the FMA’s website for any enforcement actions.
  • What is your client retention rate? – A high retention rate suggests clients are satisfied.

Step 8: Understand What Happens if You Leave

Plans change. You might move overseas, switch advisers, or manage your own investments. Know the exit terms upfront.

  • Can I cancel our agreement at any time? – Most contracts allow this, but check for notice periods or exit fees.
  • What happens to my investments if I leave? – You should retain ownership of all assets. Ask if there are any transfer costs.
  • Will you provide a handover summary? – A good adviser will help you transition smoothly.

Key Tips for Your Search

  • Interview at least two or three advisers before making a decision. Compare their answers and see who feels like the best fit.
  • Trust your gut – If something feels off or too pushy, walk away.
  • Start with a free initial meeting – Most advisers offer this, so you can ask questions without commitment.
  • Check the FMA’s website for a list of registered advisers and any disciplinary history.