Mark Lister: What makes a good financial adviser?

Mark Lister asks what makes a good financial adviser. Photo / 123rf

Opinion

COMMENT:

The new financial advice regime takes full effect as of this month.

This means anyone providing a financial advice service must hold a full licence to do so, or operate under someone else’s licence.

This marks the culmination of work that started in 2021, and the end of a two-year period where transitional licences were valid.

In short, the bar has been raised and the regulatory environment strengthened, which should drive higher standards across the industry and ultimately mean the investing public is better served.

There are many misconceptions about the true role of an investment adviser.

One of the biggest is that a measure of good advice is whether your adviser can predict where interest rates, the currency or the sharemarket will go next.

Let me clear things up right off the bat. Nobody can do that, at least not with any great accuracy or consistency.

That’s not to suggest you should give up on your adviser and go your own way. It just means you need to better understand the crucial role they play in helping you achieve your goals.

Rather than being great forecasters or stock-picking experts, the best advisers specialise in risk management.

They focus on putting together your portfolio in a way that will ensure it is sturdy enough to withstand whatever market conditions come your way.

That means a well-constructed set of investments, tailored to your specific needs and risk profile, and based on sound, disciplined investment principles.

Mark Lister is the investment director at Craigs Investment Partners.

A good adviser will put a lot of emphasis on this from the very beginning, and help you build a clear picture of exactly what it is you’re trying to achieve.

Are you investing for retirement, as a legacy for future generations, or both?

When do you want to retire, what sort of lifestyle are you hoping for when you get there, and how much will be enough to achieve that?

Are you looking for a steady income stream, long-term capital growth, or stability and reliability?

These are the most important questions any investor must get to grips with.

Once you know where you’re going, a good adviser will help come up with a strategy to help get you there. More importantly, they’ll make sure you stick to it.

They become the gatekeeper - or more accurately, the bouncer - of any bad ideas that might try to get in the door.

There’s always a bandwagon to jump on, a poor decision to be made, or the temptation to panic and run for the hills at precisely the wrong time.

Sometimes we come away from those with nothing more than a bruised ego, but others can cause permanent damage to our financial future.

This is when a good adviser comes into their own. They will ensure your portfolio and your strategy remains aligned with your long-term plan, regardless of what is going on around you.

It is their one job.

They are not here to predict where the NZX 50 index might finish this year, whether one stock will beat another, or other trivialities that will have little bearing on the value of your nest egg upon retirement some time in the 2030s.

There are many more important qualities to look for when entrusting your savings to someone.

They are a behavioural coach, an educator and a business partner. They will keep you on the straight and narrow, ensure you stay focused on your goals and objectives and rein you in when you start to stray from the path.

Make sure you understand the true worth of good advice, and what it really is you’re paying for.

Mark Lister is the investment director at Craigs Investment Partners. The information in this article is provided for information only, is intended to be general in nature, and does not take into account your financial situation, objectives, goals, or risk tolerance. Before making any investment decision, Craigs Investment Partners recommends you contact an investment adviser.