Retirement: Plan as if it’s the trip of your lifetime

Advice can come in many forms, whether it’s from your parents, your doctor, or even your taxi driver. However, the quality of advice, depending on the source, may not always be in your best interests.

When I was growing up, I would seek financial advice from my mum and dad on most things before I made a final decision.

I still try to apply some of the basics they taught me in my everyday life, such as:

❚ save a little from every payday;

❚ invest for your retirement;

❚ if you can’t afford it now, wait until you can;

❚ read the fine print of any policy you take out; and

❚ if it sounds too good to be true, it probably is.

All pretty good, sage advice, most of which I would listen to. However, sometimes my emotions would get in the way of common sense and I’d invariably end up paying the price for rushing into something before working out the risks involved.

Two things come to mind straight away: My purchase of a Fiat 124 sports car and my first home in Auckland, which turned out to be a leaky home.

In both cases, with quite a bit more rigour, I could have mitigated two costly mistakes.

When it comes to investing your hard-earned cash, it can be hard to know where to start. But the good news is that, on March 15, all financial advisers need to be qualified and licensed (or work for a licensed financial advice provider) in order to provide you with financial advice.

Some may only be qualified to advise about insurance or mortgages, while others may only be able to advise you about your KiwiSaver fund or long-term investments via managed funds or other direct investments.

The best analogy that I can come up with when trying to explain the value of good financial advice is thinking about it as if you were planning a long overseas holiday. It is unlikely that you would pack your bags, head off to the airport and then decide where you might like to spend your holiday break. So why would you do this when planning for your retirement?

In most cases, you would have done some research on where you wanted to go, then developed an itinerary and timelines.

You would have assessed the different forms of transport and probably booked accommodation. You’d then have sorted out your travel insurance and protection from viruses or local nasty bugs. You would have worked out a budget and which currencies you might need.

Then you’d get to the fun bit of researching what you would do when you got there. If it was one of those once-in-a-lifetime holidays, you’d probably get a travel agent to help your cause and take away the worry, knowing that it might cost a little more, but the value of their experience would give you a better chance of a great outcome.

If you want to end up in better shape when you reach your retirement destination, the same things apply.

A financial adviser can work with you on your goals and objectives, take into account your personal circumstances and develop a plan to give you the best chance of getting to the places you want to go. They will help manage your expectations and provide a range of outcomes depending on what you might change in your current situation.

Unlike a travel agent, they will be there to update you on your progress, hold your hand through some of the more turbulent market weather, and take into account any personal changes that happen along the way.

It doesn’t come for free, but that investment in advice will pay dividends in the long term.

The problem is you won’t see that value until you get to where you are going.

Where to start

I’m a strong advocate for advice, but for many Kiwis it seems very daunting, complicated, jargon-filled and overwhelming. To help you navigate these waters a little better, here are a few places where you can start to find the right level of advice and adviser for you.

Check out the Sorted website. It provides some good information about advice and where you can get more information.

Check out the Financial Markets Authority website to learn more about what a financial adviser does and where to find one.

Many advisers are members of a national body called Financial Advice New Zealand (FANZ). Members need to follow a code of ethics and practice standards. FANZ also has the licence for the internationally recognised CFP and CLU trademarks, which a number of members have and means they have reached a higher education standard for investments and insurance.

For KiwiSaver members, chat to your provider: They may offer financial advice or provide you with a financial adviser who can help you work out what is the right fund for you.

Talk to friends or family members who may have had a good experience with an adviser and see if they might be able to help you.

Information you need

The key is to find someone you can trust, who gives you the confidence they are working with your best interests in mind and that you can build a long-term relationship with.

Every adviser should provide you with a disclosure document that outlines a number of things you need to be aware of. These include:

❚ their licence information;

❚ the nature and scope of the engagement – this covers the type of advice they can provide and what financial products they can give advice on;

❚ the services they offer;

❚ how they operate and what they are required to do;

❚ remuneration (how they will be paid and the expected fees or commissions they will charge or receive);

❚ any conflicts of interest; and

❚ how to manage any complaints, including details of the resolution service.

The new licensing of financial advice has been designed to build more consumer confidence.

The intention is to help you find the right qualified advice for your specific personal circumstances, at a price that fits your age, stage, and final retirement destination, so that your taxi driver can focus on getting you to your physical destination in one piece.