Need money advice? Shop around
Warning: This article is of a general nature only, and is no substitute for personalised financial advice.
Investment statements and finance articles are peppered with these sort of po-faced disclaimers, designed to avoid bringing down the wrath of the regulator, the Financial Markets Authority.
The truth is, everyone knows that a "substitute for personalised advice" is exactly what they are.
Why? Because for many people, paying a financial adviser just doesn't stack up.
The float of shares in Mighty River Power earlier this year was a good example of this great charade in action.
It was obvious that the so-called mum-and-dad investors looking to pick up a piddling few thousand bucks worth of shares would never pay for advice.
How many of the 113,000 actually made a decision that wasn't based on newspaper articles, or heaven forbid, a conversation around the water-cooler?
Recent research by the Commission for Financial Literacy and Retirement Income found just 15 per cent of us use an adviser.
Even that figure sounds suspiciously optimistic - there are only around 2000 authorised financial advisers in the whole country, so they must be busy.
Getting affordable advice for the small investor can be a real challenge, but it's not impossible.
QUESTION OF SCALE
Meet Slim Jim. He's been saving hard, and has scraped together $20,000 that he wants to invest.
Jim's cousin Fat Matt already has $2 million to play with after a lucky lotto win.
The best financial advisers tend to charge flat fees for investment plans, meaning both Jim and Matt's costs are similar.
"An adviser who is very good is going to want to spend a proper amount of time to help you," says Ben Brinkerhoff, head of adviser services at New Zealand Wealth.
"They're going to need to be compensated with several thousand dollars a year to really work with you properly."
Let's say the annual fee is $2000. That's small beer to Matt, representing just 0.1 per cent of his stash.
But it immediately wipes out 10 per cent of Slim Jim's much more modest savings.
"There's no way that the adviser can possibly add enough value to overcome that fee," says Brinkerhoff.
Perversely, it's almost as hard to get a decent return on the $20k as it is on the $2m.
Brinkerhoff's advice for small-timers is to focus on getting rid of any mortgage debt first, as it gives a tax and cost-free return that's hard to beat.
After that, consider going to see an adviser for a one-off session, work out an appropriate investment plan, and set and forget.
"The best thing you can do is be Rip van Winkle," he says.
When you get to the point where you're putting serious money away - maybe once you pass the $100,000 mark - go and get some ongoing professional help.
"This is your retirement,'' says Brinkerhoff. ''You can't mess around with it."
Institute of Financial Advisers president Nigel Tate has similar advice for the Slim Jims among us.
He says a decent financial plan will probably set you back anywhere from $800-$1200, but you don't have to shell out that much every single year.
"Whilst it's a living document, it doesn't need to be rewritten every time," he says.
"It does, however, need to be reviewed."
Getting together once a year might cost $200 or so. That's obviously not going to include much active investment help, but it's a good way of touching base.
Tate also suggests one way you might be able to get that first, expensive consultation written down to nothing.
Insurance is the one area where even independent financial advisers still earn commissions.
If you're buying insurance of some kind - life, health, income protection - you may be able to wipe out the costs of the consultation.
"Quite often advisers will rebate it against any commissions earned," says Tate.
If the adviser doesn't mention it, be sure to ask.
The commission's research found that most of us are reluctant to open our wallets.
The number one source of advice by a long way was the banks, at 47 per cent.
The swankiest customers get the full red-carpet and valet parking treatment through the big lenders' Private Banks.
ASB says clients typically have an annual income of $200,000 or more, and over $2m worth of assets.
Other customers will be dealing with counter staff or the banks in-house financial advisers, who you can usually book a session with at no cost.
But this isn't exactly independent advice.
Bank staff have a vested interest in selling you bank products- whether that be KiwiSaver, insurance, term deposits, bonds, or other investments.
In some cases, that's all they're authorised to sell.
"There is no such thing as a 'free' consultation," says Tate.
Other professionals like mortgage brokers, stock brokers and insurance sales people occupy the same sort of grey area.
They can give you good advice, but whether or not they are truly independent depends on how they get paid.
The bad news is that affordable financial advice may be slipping further out of reach.
That's a consequence of several extra layers of regulation that the industry has been saddled with, most recently with new anti-money laundering rules.
Tate thinks the regulatory crackdown is more about improving public confidence than anything else.
"I haven't yet seen it improve the advice to any client. I haven't yet seen it prevent a criminal stealing people's money."
Advisers have a lot more paperwork to fill out, as well as more policies, procedures, training, manuals, compliance offers, and audits.
"So all of this regulation, whilst it's well meaning, whilst it's prudent, its exceedingly expensive for the practitioners, it's exceedingly time-consuming and ultimately the clients will have to pay for it," says Tate.
David Kneebone, executive director of the Commission, acknowledges there are some issues around access to advice.
"I'm afraid there is a gap, currently, and we look forward to seeing how that community is going to solve that."
Brinkerhoff is confident that the market will find an answer. In his homeland - the United States - Slim Jim would have lots of great options, he says.
"Never downplay innovation- it's always been the saving grace of capitalism, driving down cost and increasing options."
Until then, the best way forward for average Kiwis is to collect knowledge from as many reputable sources as possible.
"Having a conversation with a major financial planner is a good idea - like a bank," says Kneebone.
"Or make sure you've absorbed the information available from independent websites and sources you trust, which can include the media."
Weigh up everything you see, hear, and read, and don't forget to take it with a liberal pinch of salt.
Says Kneebone: "It's where you see consistency in that advice that it will probably lead you down a path that's right for you."
- © Fairfax NZ News