Liz Koh: Advisers price out smaller investors

By Liz Koh

One of the unfortunate consequences of increased regulation of financial advisers is that some smaller investors now find themselves squeezed out of the market for personalised investment advice.

There are two types of advisers who are able to give advice to the public: authorised financial advisers (AFAs) and qualifying entity advisers (QFEs). Whereas AFAs can give investment advice on a wide range of investment products, QFEs can give advice only on products offered by the company they work for.

QFEs are generally large companies such as banks and insurance companies.

There are fewer than 2000 AFAs in New Zealand, and many who hold the designation do not give advice to the general public. Just to make it even more confusing, some of the AFAs work for QFEs such as banks.

However, an AFA working for a QFE can give advice on a wide range of investment products from different providers.

With the limited number of AFAs available, many advisers and QFEs are now setting minimum limits on the size of an investment portfolio they will advise on and manage.

These limits can be anywhere from $100,000 to $1 million or more.

At the other end of the spectrum, QFEs, such as banks, are using the large number of advisers in their branches to sell KiwiSaver, and savings and investment funds, for small lump sums or regular contributions.

It is increasingly difficult for investors with small to average portfolios to find advisers who can advise them on a wide range of investment products from different providers.

Getting advice on whether to purchase shares in the proposed Government asset sell-down is a prime example of this, as advice will need to be obtained from an AFA adviser, not a QFE, many of whom will not be interested in working for smaller investors.

Liz Koh is an authorised financial adviser. The advice given here is general and doesn't constitute specific advice to any person. A free disclosure statement can be obtained by calling 0800 273 847.

- Hamilton News

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