Personal finance editor Amanda Morrall asks whether financial advice is worth paying for; what's your experience? Good, bad or ugly. RSVP

Do your own research!

But you can't go wrong with a well structured low maintenance negatively geared rental property 

The breadth of opinion is huge and a lot of it shallow IMHO. Ive lost enough money with private schemes that I will/have been doing my own thing for a decade....Im perfectly happy to make my own calls.  Im in cash and paying down debt as I think its going to be nasty.....but I dont see why I cant turn around quickly if need be.....

regards

Steven ​constantly gives unsolicited financial advice on interest.co - is he a qualified financial advisor? 

Financial advisors are not financial advisors.  They are paid salesmen.  There is not even an indication that they assist people to do better with money.

I think debt councilors are useful for people who have significant credit card debt and are a bit overwhelmed by it all.  I'm not sure investment advisors are of much use, unless its a bull market and in that case, you probably don't need them.

All the financial advice you'll ever need:

1. Shelter (house): This is  a basic human need that you will need for the rest of your life. Buy shelter early and direct every cent you can to pay it off.(avoid extravagant shelter that you can't really afford)

2. Once shelter is paid off buy other things that grow e.g land/commercial buildings/shares/term deposits/bonds. Try and mix it up, do your own homework, go for it.

3. Spend less than you earn . Don't buy stuff...most of it will be in a landfill in a few years anyway.

Stick to these rules and life is pretty simple!

My experience with a number of share brokers has been poor, so I do my own thing and that way must take more care and responsibility for my decisions.  I dont doubt that there are some good ones out there but the ones I have encountered seem to confuse you and the net result often is a lot of unecessary buying and selling.  That is how they make their money (each transaction)  Buy safe steady assets and get rich slowly instead of poor quickly. 

Neili's advice is spot on and number 3 is the most important. 

If you are young avoid debt like the plague,  Stay at home instead of racking up a student debt flatting.  Apart from the debt accumulated it seems to set a life pattern of borrowing.

Wonderful stories.

We live in the nation of entitlement and we want our rights, but the reverse side of that coin is painted in responsibility.

What many see as an opportunity to get out of risk and consequences a few see as a treasure to be mined.

And they are out there these few, on the highways and down the byways.  Often quiet, rarely seen on the podium of self promotion because they enjoy getting on with life.  Sometimes you catch a glimpse of them in the twilight scamping away from the mob with its self righteous placards.

Don't define yourself by what you can't do.  You are responsible for your own life - embrace the truth of it and strike forth.  Remember, anything one woman can do - another woman can do!

Downsides of the self-made investor:   A not uncommon scenario: -  the retired/nearly retired kiwi, debt-free home, 3 or 400,000 to invest, puts the whole lot into a finance company/s at 11%.  Loses the lot.   Could have left it in the bank.   Something happens to their brain after a lifetime of struggle, finally gets debt-free with some surplus, then ..... 

Even your average family solicitor tells the parents:  don't put your money into a finance company.   Maybe $10,000 for fun out of a few 100,000 - but not a whole bunch.  Sure we can blame the failed finance co directors and any external advisors that advised the joe average investor  -   but,  don't they need to take some responsibility for the risk themselves?

An example of extreme saving and extreme early retirement that we can learn a few tricks from is a Danish guy (with a PhD in Physics) who lives in USA. He saves 75% of his income and retires after working for about 5 years.  He runs a blog (www.earlyretirementextreme.com) and wrote a book on the subject.  He has a following on the movement on early retirement extreme (nicely abbreviated ERE).  Some of his thinking and philosophy is quite interesting and deep for a guy who is in his mid-30's, which I guess is a result of European schooling that expose youngsters to great thinkers/philosophers.

I work for an large "industry" fund here in oz. Industry funds are basically run only to benefit members rather than turn a profit like retail super providers. It's funny because I deal with so called "financial advisors" on a daily basis (who are basically just glorified sales-folk) - the sales focused nature just oozes from these interactions......

We have a team of advisors that are offered free of charge as a means of value adding to our product and retaining membership. I'm sure if the model was introduced in NZ the big players would be s**tting themselves.....

As a basic rule of thumb the trick to Financial Planning:

Start early, cut back leverage and growth assets as you approach retirement. (diversify blah blah blah)

My only personal experience, about 5 years ago, was a complete turn off.  The "advisor" did not bother with any sort of anaysis of our affairs, completely ignored our reason for asking for a visit, and proceeded to "analyse" our insurance needs and recommending further spending on life and income protection.  It was a guilt laden upsell,  implying (looking at my wife while doing it) that I was endangering my family if I was not increasing my cover while disregarding our cashflow and investment situation. 

He did all this without basic questions about our assets and liabilities.  If were not for my promoting would have had no idea about shares or property, in work schemes, or even our basic budgets.  He was there for two reasons - 1. ensure we did not reduce any existing payments he collected a commision on, 2 - try to increase our payments.

I was naive but hope my eyes are open now ...

I understand the above comments however paying for financial advice can be worth it weight in gold, seen it so many times. Be it a pro-active business advice,  business introductions, commercial strategy or due-diligence on options you may be considering. Some insightful experience at the right moment can be life changing. These all reflect investments, more pro-active investments provide the returns.

The catch is few have the real ability, dedication or independence to provide it. There are so many more investment opportunities people simply are not aware of. For most people they will never meet the independent advisor who has made it their passion to be the best they can be in a niche, who gets a buzz helping others, they charge  however do not need the money, they have made their money.

Naturally you alternative is to live within your means and aim for capital preservation. Although wouldn't it be preferable to live a larger life? 

Financial advisors, insurance advisors and commission agents have put so many off even seeking out advice which is tragic.

There is still a place for competent financial advisors , given the lack of financial education in the secondary school system ........

....... and as us BB's got scant useful financial advice from our parents , the " traditionalists " generation , Gen X & Y need some guidence ........

The key thing being , that the financial advisor work on a fee basis only , and be truely independent from any firm pushing their products . Commission salesmen do not qualify as independent advisors .

........ hmmmmm , that's an easy way to double your advisory fee , " fat finger " the freakin' button !

The history of the financial advisory industry in Australasia.

Up until Paul Keating introduced compulsory superannuation in Australia, late 1980's, the major life insurance companies, (AMP, MLC, Prudential), had hordes of commission only insurance agents working nights, making appointments and calling on the lemmings at night, at home, selling life insurance. You couldn't miss them.

The introduction of compulsory super changed all that. The insurance companies collaborated, formed the FPA (Financial Planning Association) set their insurance salesmen up as "financial planners" selling superannuation schemes instead. The Financial Planners were outsourced as businesses in their own right, as FPA members, but affiliated with the Insurance companies selling products instead of insurance only. Foundation Members of the FPA never sat exams. They all got automatic entry.

The restructure of the industry struggled for the first few years, but as the "dedicated" pool of funds grew, the industry matured. Financial Planners were selling Financial Lifestyle Plans.

By 2000, as the industry neared $800 million in total "funds under management" the industry was in full stride. The most successful was ColonialFirstState. The banks began to sit up and notice. They were missing out on the ticket clipping the Fund Managers were enjoying. So the banks (ANZ,CBA,WBC,NAB) started buying the Insurance Companies, and CBA took over Colonial First State.

Now when you walk into a bank, the tellers who are on performance contracts will try and "sell" you something, trying to set you up with an appointment to see one of their "Financial Planners" who are touted as Financial Advisors, who are simply "product floggers"

The unfortunate fact is the 4 "banks" comprise 80% of the superannuation and funds management industry and employ 80% of the "financial advisors". When meeting a financial advisor the first question you need to resolve is: are they independent or part of a dealer network group.

Fantastic story regarding the lady managing her own future, wish there we more like it. We dont need government trying to do every thing for every one, thats the problem!! 

As for financial advice, my first question to any adviser or economist, "did you forecast the financial crises?" if not , that's all I need to know.

I am am managing my own future too, http://j.mp/yE0rV4.

Thanks all for your contributions. Amanda

Hang on there Amanda....(cough cough !) Ahem.....as I've said many times...

Free Advice  is worth every penny you paid for it..... .....

On paid advice....I would certainly rate Milford Asset Manag. ....but have my doubts as to the level of dilligence applied by people in general when investing their money.

That is to say ,people, while they may not be literate in matters financial ,have an obligation unto themselves to have understood the terms of their investment and risk (if any) when under direction of FM's......

 Believe it or not , some of the major criteria required to be met by many investors in relation to the Qualification of their Financial Managers are..

He/She seems to know what their talking about.....

He / She seems to be a nice honest person.....

I don't really understand all that , that's why I'm paying you....and so on.

My worthless piece of advice to a large number of investors is ...if you did not understand that...say so....and again ...and again ...untill you do..! Or you have just made a blind investment with no care and all responsibility.

 That said Good Morning Amanda....for you!

my theory - it might be worth getting advice re what asset allocation you should have, and then refresh this every 5 years. But once you have this, simply buy index funds to reflect this allocation. Lets face it, the index is the weighted average of everyones best guess - this includes all the retail and institutional investors buying / selling on the basis of good / bad / indifferent advice. You could do your own research and buy select stocks, but we can only assume that the market approximates to the results of everyone else's research - do you think you can do better? and do you think your adviser can do better after fees? remember, you are BUYING off someone who is SELLING - maybe that person is selling because his adviser told him to.

The above approach achieves diversification, exposure to growth and most importantly, LOW FEES.

Financial advise is worth paying for but not many people see the value.

A good advisor will help people manage their cash flows better  help focus on goals and assist with managing financial risk. Most of the population just drift along with predictable results. $1 in $1.10 out.,hopelessly unbalanced investment portfolios and no way of dealing with anything that goes wrong.

Financial advisory work requires increasing technical competence as economies and financial products become more complex ( witness the ING funds mentioned above that none of the advisors understood) and it also needs a salesman's ( or woman's ) touch to make people take action. Costs of doing business ( insurance , compliance etc) are also rising Not many people have the skills and personality required and those who do deserve to earn a reasonable income.

That is where the problem lies with most of the advisory industry. Not enough people who see the value and a need to earn a reasonable return for skills, aptitude and experience. The answer has been commissions. It means you can go and see an advisor who might charge you a couple of hundred dollars just to make sure you are serious. They will then actually get paid by product suppliers. It can work OK but the potential conflicts of interest are obvious and they have also been very real. The Finance company catastrophe would have been much less severe if it was not for the Financial Planners.

There is a trend away from commissions towards fees but if the public dont see value for the fees that will mean less advisors when the need has never been greater..

I have no idea what the solution to all this is.

why pay for financial advice.in the old days you could listen to DOUG SOMERS EDGAR and MURIEL DUNN on the old radio pacific and get it for free including investing in bridgecorp and moneymanagers.

umm the old days

Some good comments here. I agree wholeheartdely with KH and Happyfunball (cool name!) that really most financial "advisors" are simply selling product. You would be much better off with a budget/debt counselor before you start thinking about financial advice.

Personally I've been involved in financial markets for nearly 30 years. For the last 6 years, I've been a volunteer budget advisor. It's been a real eye opener, as I've seen close up how people get themselves into financial problems and how they manage their debts. At one extreme, I've seen people through bankruptcy (personal debts of over $40k) and at the other I've helped double income couples to simply manage their money in a better way (and yes Amanda, women are much better at this!!)

Personally, I think the funds management business is a waste of people's money. Historically It was harder to manage ones own cash, as access was more expensive and complicated. Now, and in the future, we will see those barriers and costs continue to fall (investing will get the TradeMe/ Xero going over at some point). 

I reckon I could teach anyone in a few hours how to invest in the markets and avoid the need for extortionate fees and trailing commissions. Financial advisors should charge like any other professional, a simple hourly fee. 

It's really quite simple. Learn the basics, understand what your needs are. Learn to save and avoid debt unless you can really justify it. If you do have cash left over that you want to invest then do a little homework or pay for some good advice on an hourly basis :-)

Take more care when advising the elderly..!!......I was at an ATM yesterday when a little old lady asked if I could check her balance, so I pushed her over.

Financial advice 101 . IQ Taxation Rule

If your wage is higher than your IQ you are paid to much and therefore finacial advise cost is another type of tax  to make sure your income does not exceed you IQ  level .

And just because you work  for  banks , accounting firm or law firm does not make your IQ any higher so therefore you will fall under the  IQ tax provision .

This site reminds me of when I enter   a taxi and  because the taxi driver listens to Bernard Hickey on radio now they are ecconomist as well .

Honesty and integrity when have they been part of business they are merely a marketing tool .

You go to a financial adviser wanting a future prediction . MMM  of how to make more money that smells like greed to me

As for you name if NZ does not become a slave someone else will that economics is that not just as bad .

One of the best to listen to is Nicole Foss - in Auckland at the moment.

Or you could read this:

http://www.chrismartenson.com/blog/trouble-money/73469

"It is this last part, the oil story, which has almost entirely eluded the intellectual grasp of our monetary and fiscal masters. I don't blame them, as mastery of the physical sciences is not a requirement of any classical economics departments in any of the universities that churn out our PhD economists.

This is very strange, when you think about it, because economics is entirely rooted in the process of extracting and converting natural wealth into material wealth. Without the primary inputs of the earth, there would be NO secondary or tertiary wealth for us to divvy up (via a money-driven rationing process) or develop exotic derivative products around.  Economics should be the study of energy and resource flows as well as money"

Wonder where you've heard that line before, Amanda?

The whole article should be required reading for anyone liiking to go into hock at this point..