At Cambridge Partners, we refer to our advisers as ‘financial advisers’, whereas the more common term in New Zealand is ‘investment adviser’. In this article, we explore the similarities and differences between the two and explain why we believe advice should incorporate more than just investments.
What do Financial Advisers have in common with Investment Advisers?
Both will meet with you to discuss your situation and develop an investment plan. They will then offer to manage a portfolio for you for a fee. This fee can be commission-based – paid by product providers or a percentage of assets under management paid by the client to the adviser. They should meet with you on a regular basis to review the portfolio and ensure it is still fit for purpose. They will also take care of portfolio administration, such as rebalancing and tax and performance reporting.
Investment advisers often try to differentiate themselves based on the strength of their investment recommendations and highlight things such as ‘high-quality research’, ‘global reach’, ‘expert advisers’, etc. They tend to be more active with their portfolios and have a higher turnover of securities bought and sold.
At Cambridge Partners, we don’t believe that active portfolio management adds to portfolio returns; in fact, research shows the opposite. Our evidence-based portfolios provide our clients with the best opportunity to make strong returns, while our advisers focus on all the other areas where we can add value to our clients. As New Zealand follows trends seen overseas with the rise of passively managed, low-cost investment solutions, we believe that advisers will need to offer more than an investment portfolio to add value to their clients.
What sets a Financial Adviser apart from an Investment Adviser?
An experienced financial adviser will take the time to develop a comprehensive financial plan before any investment recommendations are made and managed. A professionally developed plan puts you in control of your decision-making and gives you peace of mind.
The plan will incorporate your values and goals, identify your specific needs, and be updated as your situation changes. It will contain a recommended investment portfolio and cover areas such as retirement planning and cashflow modelling. Areas such as asset protection, estate planning, tax management, and insurance coverage will also be considered, and financial advisers will highlight where further specialist advice is required. This kind of holistic service can also be known as Wealth Management. These other areas beyond the portfolio itself are things that an investment adviser may not touch on.
Once a plan and a portfolio are in place, a financial adviser will meet with you at least annually to discuss your progress. This includes a review of investment performance, which an investment adviser will also do, but over time, we find the planning aspects dominate our discussions with our clients rather than investments.
Many people may not think they need a financial plan and wait until it is too late to implement one. The most common piece of feedback we get from new clients is that they wish they had come and seen us sooner. A comprehensive financial plan and ongoing cashflow modelling provide clarity and confidence that an investment portfolio alone does not.
We never know what life will throw at us, and our team of financial advisers can help you navigate whatever comes your way. This support and guidance will provide value beyond the financial return of an investment portfolio.