Evaluating an Investment Advisory Service

1. Integrity
2. Experience, knowledge
3. Personality
4. Formal qualifications
5. Industry affiliation

This is a business about people and their money so a professional adviser has to have both integrity and an ability to communicate effectively with their client. We place high store on these attributes as we have seen too many instances of people with formal qualifications and hence the technical expertise, who simply provide very poor guidance and leave clients dissatisfied. This often arises as advisors, in the pursuit of higher income, sacrifice portfolio quality in pursuit of maximum fees. It is not uncommon at all to find investors who have used two or more advisors and found investment performance low as a result of the combination of fees, tax inefficiency and poor instrument selection.

In our opinion the benefit of affiliation to industry associations have been very difficult to identify. The attempt to impose a homogeneity on investment advisors practices has lead to a "dumbing down" of the advice given with the result that we have large tracts of the New Zealand investing public with portfolios that reflect the industry's self interest rather than the clients'. The past offers many examples For instance in the mid-1980's there was gross institutional over-investment in commercial property with the result many investors lost huge value in their superannuation. Further with the proliferation of up-front fees, fee-gouging management fees and advisors reaping fees from products as well - industry solidarity provides no guarantee at all of protecting investor interests.

It is important advisers not be slaves to conventional wisdom as too often the "industry" does pursue fads a bit like sheep. An advisor that demonstrates an independent streak and demonstrates a talent for innovation in pursuit of adding value to investor clients, is in our view, a valuable addition to the investment advisory business.

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