Advisers cluster around the rich

Financial advisers go where there is most wealth to earn commission from, a census of authorised financial advisers (AFAs) shows.

The Financial Markets Authority gathers data on AFAs, who are the most highly-skilled financial advisers in the country, able to give personalised advice, and recommend complex products.

It revealed there were about 1800 in the country, which was an increase on the previous year, but also showed they were heavily clustered in the richer parts of the country.

But while Aucklanders, Wellingtonians and Cantabrians are well-served for personalised financial advice, there’s an advice drought in Northland, Gisborne, and the West Coast.

The FMA’s snapshot of AFAs around the country showed Wellington had a per capita gross domestic product of $65,974, and 5.1 AFAs for every 10,000 people.

The West Coast, with a per capita GDP of $50,491, had just 1.2 AFAs for every 10,000 people.

In Auckland, the ratio was 4.1, in Canterbury it was 4.2, and in Otago it was 4.7.

Michael Dowling from the Institute of Financial Planners wasn’t surprised at the distribution of advice, saying AFAs specialised in advising clients with ‘‘more complex’’ affairs.

‘‘Many specialise in advising clients on investing money. They would be centred around their client base.’’

The FMA has become concerned that the majority of people are not getting the advice they need to build wealth for a happy and prosperous retirement.

‘‘There are 150,000 to 200,000 customers of the authorised financial advisers in New Zealand, but that is just a fraction of the population,’’ said the FMA’s Liam Mason.

‘‘A lot of people are not getting advice from an AFA, and that is probably around the amount of money they have to invest.’’

Most advisers drew the majority of their income from commission on selling investment products and insurance, the FMA’s snapshot showed, rather than from charging fees like lawyers and accountants, the FMA’s data shows.

But, Mason said, there was a growing focus on getting advice to everyone who wants it, regardless of their level of wealth, and where they live in the country, particularly KiwiSaver advice.

Earlier this year the FMA issued new guidance to KiwiSaver providers aimed at encouraging them to provide more simple, generic ‘‘class’’ advice to customers to help them make better decisions, such as selecting which type of fund to save into.

In the future many people are expected to get their advice online, delivered by artificial intelligence.

It’s known as ‘‘roboadvice’’, and many Kiwis were ready to embrace it, a report from KiwiSaver provider KiwiWealth found last year.

Mason said New Zealand’s advice laws were being reviewed as at present personalised ‘‘advice’’ could only be legally given by a human being.