Using Financial Advisers in the new financial environment. What’s the story?
We have blogged in the past about the benefits of using a Financial Adviser. In this blog we want to talk a little bit more about what is going on in the industry and the benefits of these changes to you.
First a wee bit of a history lesson, so you have the context of the Why. We love talking big picture!
Finance is more than money – lending, investments, money for retirement.
Finance is about:
Personal insurance – health, income, life etc
General risk insurance – otherwise known as Fire and General Insurance – cars, contents, houses, things as well as business type covers such as Public Liability and Indemnity insurance
Estate planning – wills and enduring powers of attorney
Lending – credit cards, personal loans, home loans, business loans, commercial loans
Retirement planning – KiwiSaver and other investments
Budgeting and cashflow management
Accounting for completing your tax obligations
Investments for pre-retirement living
Investments cover – managed funds, cash deposits, shares, cryptocurrencies and many more
Business – making sure your business is an asset that produces positive cashflow
Asset protection – Trusts and other entities to reduce your risk and protect your wealth
Property – Residential and commercial for homes or investment
Our financial life is complex!
Mostly we are thrust into the world of finance without being aware of all the factors that affect us… and to be fair our financial life is not the only place we need to learn from the school of hard knocks. The same applies for new parents. When you find out you are expecting your first child, you start the conversations and start talking to others and you may even read some of the many books that have been written about being a parent. Some people do the same with their finances. Talking about your parenting style and approach with others is very different to talking about finance. For many people (perhaps especially the older generation?) money is not something that is talked about publicly. For both parenting advice and finance, it is easy to get advice around the BBQ. Usually the people giving the advice are not experts in the topic being discussed… but we all have opinions. Without knowing more about the goals of the person with the problem and the specific factors that need to be taken into consideration the ‘advice’ should be taken with caution.
The financial environment has been becoming ever increasingly complex and that is without the addition of pandemics to further complicate our worlds.
Over that last 20 or so years the various Governments have realised the importance of good financial advice and support. The Government (and it is not just Labour or National – all governments) wish to protect citizens from the Cowboys providing bad advice and from companies that prey on the uneducated (or believe it or not the wealthy) with dodgy products and services. There is an approach of constant and never ending improvement in the protections that the Governments put in place; and sometimes they get it right and sometimes it doesn’t work out how it was intended or expected (obviously we’ve seen this with the recent changes to the CCCFA, and the difficulties in getting finance that these changes have caused).
Initiatives like KiwiSaver have had a massive positive effect for many people, enabling them to save and get into a home that they would not otherwise have been able to purchase without KiwiSaver. But the system is still flawed as those on benefits do not have enough extra income to afford to contribute. They are effectively tied to government support for life, living at a basic level of survival, and what we know is that not all people are on a benefit by choice.
The Financial Services Provider Register was established in 2008 and required anyone providing financial services to be registered. It did not require them to have qualifications or follow any strict processes. This was really the beginning of the journey to make sure that protections were in place for you and the general public. Guidelines for how the institutions and advisers operated were outlined there and how strict the requirements were depended on the type of registration.
In 2019 the Government issued the next phase of the legislation with amendments due to come into force on 21 March 2021.
Some of the changes included:
Registered and Authorised Financial Advisers now just called Financial Advisers
Companies providing advice need to belong to a Financial Advice Provider (FAP)
Banks, insurance companies and any other institutions such as KiwiSaver Companies need to be a Financial Advice Provider
Minimum levels of education and qualification standards need to be met for providing advice, and this includes for bank and other insurance related staff
Strict processes need to followed for providing advice
All of this is to ensure that you, the client, are protected and receiving quality advice. Also that in the event something happens to your Financial Adviser that sufficient processes are in place to ensure that your needs are taken care of in an ongoing manner.
This has been a big change for many advisers and companies, with many adjustments to processes being made to meet the new regulations. Change creates uncertainty. How the new regulations were going to be interpreted and what changes needed to be made to existing systems and processes took some time for the FMA (Financial Markets Authority) who manage and police it, to clarify for the companies that need to adhere to the new requirements.
One of the problems with this new legislation is that some advisers are choosing to leave the industry due to the additional requirements or the additional learning (apparently some old dogs don’t want to learn new tricks ????). This is a problem for us as a country as it means that the level of financial literacy support available for you is reducing. Some banks are so busy that they are pushing work out to Advisers so that the clients are able to get a better level of service and support, especially for the purpose of preparing them to purchase. This is a serious problem, with the banks being so stretched.
At Building on Basics we were excited about the changes and the protections that it is providing to users of the financial services. Being approved for a licence is a one time task, and on 15 June 2022 we received our full FAP licence.
We are very happy about this fantastic achievement!
Now we can get back to the business of looking after you as our sole focus!!
Using a Financial Adviser gives you some level of independence from the various providers, ensuring that you are matched with a bank or lender or insurance company that will best serve you.
When you go direct to a bank you are limited to the one set of products that the bank you are using offers, which may or may not serve your purpose. We look at your goals and objectives – not just for now, but your long term plans.
So, the benefits of working with us as your Financial Adviser -We offer a wrap around service, walking with you towards achieving your goals and making those dreams reality!
Got questions? Get in touch with us and we can chat about your best options for paying off your mortgage, buying your first home, or getting your Will sorted.