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There are many different types of “financial adviser”

26 June 2020

There are many different types of “financial adviser.”

You may think you want to engage a financial adviser. Or you may wonder whether it’s worth engaging a financial adviser.

That’s great!

But what type of financial adviser do you have in mind?

Unfortunately, the term “financial adviser” is very broad. It describes lots of different types of advisers:

Below is a list of ways that financial advisers can differ from one another. As you read this, think about what characteristics might be relevant to you and your situation.

There are:

  • financial advisers who specialise in lending;
  • financial advisers who specialise in personal insurance (and even then, some specialise in personal insurance, some specialise in general insurance, some specialise in professional indemnity; etc);
  • financial advisers who are employees of product issuers;
  • financial advisers who provide budgeting/cash flow assistance;
  • financial advisers who see themselves as money coaches;
  • financial advisers who are specialists in relation to direct property;
  • financial advisers who are investment managers – whose main role is to manage client portfolios (some advise on KiwiSaver, some don’t);
  • financial advisers who are financial planners – who help clients build plans to help them achieve their goals and manage their risks;
  • financial advisers who try to be planners and investment managers;
  • financial advisers who provide some combination of lending/insurance/planning/investment management services (talk about boiling the ocean!);
  • financial advisers who are planners/investment managers who implement advice and manage their clients’ money on platforms such as Aegis or FNZ;
  • financial advisers who hold themselves out as fiduciaries (whether or not they are) and advisers who don’t;
  • financial advisers who are planners who provide advice-only services and who don’t touch client money;
  • financial advisers who are planners/investment managers who charge clients an ongoing fee calculated as a % of investment portfolios;
  • financial advisers who are planners who charge an hourly rate or fixed fee;
  • financial advisers who receive commission and other benefits from product providers;
  • financial advisers who are planners/investment managers that have a bias towards active investing over passive investing and vice versa;
  • financial advisers who provide templated/cookie-cutter advice versus advisers who provide highly bespoke advice;
  • financial advisers who provide good advice and financial advisers who provide bad advice (and advisers at many points in between;
  • financial advisers who have designations such as CFP, CLU, and CFA;
  • financial advisers who are Authorised Financial Advisers (AFAs), Registered Financial Advisers (RFAs), or representatives of Qualifying Financial Entities (QFEs);
  • financial advisers who hold professional indemnity insurance and financial advisers who don’t;
  • financial advisers (of any stripe) who are at varying points on the “independence” spectrum (ie, interests aligned with clients vs interests in conflict with clients);
  • financial advisers who change their clients lives for the better;
  • financial advisers who change their clients’ lives for the worse;
  • financial advisers who provide excellent advice that isn’t implemented, and financial advisers who provide advice that is actually followed;
  • financial advisers who make an enormous amount of money and financial advisers who make very little money;
  • financial advisers I would happily engage myself and recommend to loved ones, and advisers I would steer my loved ones away from;
  • financial advisers who are on your wavelength, and financial advisers who don’t click with you;

and many distinctions in between.

It’s no wonder why people have trouble finding a “financial adviser” and are confused about what they do.

As an adviser, I fit some of these descriptions but not all of them. I provide the ideal set of services for a small subsection of Kiwis. The services I provide aren’t for everyone. It’s the same with every other adviser out there.

If you’re looking for a financial adviser, the first thing to ask yourself is: what type of service am I looking for?

The bullet points above might be relevant. You can highlight or cross out what you want or don’t want. I’ve also collated a bunch of questions you can ask when you’re thinking of engaging a financial adviser. Some are more relevant for certain types of advisers than others, but they might help inform your research. The list is here.


Tags

financial advice, types of financial advisers, what type of financial adviser do I need


About the author 

Sonnie Bailey

In his spare time, Sonnie likes telling people that he’s a former Olympic power walker, a lion tamer, or that he is an orthodontist. He is none of those things. In reality, Sonnie is a financial planner based in Christchurch. Through his business, Fairhaven Wealth (www.fairhavenwealth.co.nz), he provides independent, advice-only, fixed-fee financial planning services. Sonnie is a “recovering lawyer”: he has specialised in trusts and personal client work. He has also worked as a financial services lawyer for many years.

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