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C & D

KiwiSaver – Are You Getting the Right Advice?

The Financial Markets Authority has just published a pamphlet entitled “KiwiSaver – Are You Getting the Right Advice”. We believe that this is very timely, as many KiwiSaver investors are not invested in the best product in which to meet their needs.

KiwiSaver is a long term investment. A forty year old will, with all things being equal, be in a KiwiSaver fund until they turn sixty five. For most people, their KiwiSaver contributions go indirectly to their KiwiSaver provider via the IRD with their employers regular monthly or two weekly deductions which include PAYE, the employer’s contribution, the employee’s contribution, child maintenance payments and any other deductions. Effectively it is a ‘painless” way to invest.

So KiwiSaver is an easy and affordable way to save for your retirement. However to get the best out of it, you should seek advice. There are really three “advice options”.

No advice:  You will only receive general information. The sales representative will be able to answer any general questions you have and provide some factual information about the scheme. They cannot legally give you any advice.  You will need to form your own opinion about whether KiwiSaver is right for you and which scheme and type of fund to invest in.

Class Advice: You will receive generic advice. The sales representative will be able to advise you about what is usually suitable for people in your group or “class”. They cannot give you advice about your own individual needs and their advice won’t take into account your personal situation. You can use the generic advice to form your own opinion. Any entity or individual registered to provide a financial adviser service can provide class advice.

Personal Advice:You will receive advice tailored to your personal circumstances. The adviser can help you with the decision process on whether you should get into KiwiSaver, and if so, whether the KiwiSaver scheme they represent is suitable for you and which fund is best. As you will be receiving personalised financial advice you can expect that the adviser has taken into account your personal situation and your investment goals. An Authorised Financial Adviser (AFA), or an employee of a Qualifying Financial Entity (QFE) advising on their company’s own KiwiSaver scheme can provide personal advice.

There are two key questions that you should ask your adviser or sales representative. Firstly how many different KiwiSaver schemes he or she sells. Second, if you are already in a KiwiSaver Scheme, whether he or she can compare the scheme being offered to the scheme you are already in.

Given that KiwiSaver is such a long term investment savings scheme, and could contribute significantly with the funding of your retirement, we believe that it would be prudent to consult with a well-qualified Authorised Financial Adviser, regardless of whether you are considering joining KiwiSaver, or if you are already a KiwiSaver member.

There have been major changes within KiwiSaver providers since KiwiSaver commenced, and some advisers at that time simply promoted the scheme that they were making the most money from. Now with regulation they have to act in the client’s best interests.

Disclaimer

Steven Barton (FSP 32663) and Susan Pascoe Barton (FSP 32382) are Certified Financial Planners and Authorised Financial Advisers.  Their initial disclosure statements are available free of charge by contacting them on (07) 3060080 or they can be downloaded from www.pascoebarton.co.nz. This column is general in nature and should not be regarded as personalised investment advice.