New legislation with the registration of financial advisers comes into affect on July 1. As Authorised Financial Advisers, we have to abide by an 18-point Code of Professional Conduct.
In general, the code does not place any greater emphasis on any particular aspect of giving financial advice but more formalises what most of us as financial planners have been doing all our professional careers.
Among other things, the code requires advisers to collect sufficient data from a prospective client to provide advice that fits the client's needs and also identify any areas where other professionals may be required.
Recently, when interviewing a prospective client, I discovered he did not have a will.
As I was interviewing him for a possible investment of a large cash asset, I briefly commented on the consequences of dying intestate and urged him to see a lawyer to draw up a will.
Dying intestate means the Administration Act 1969 sets out the form of distribution of your estate. It is not automatic that your surviving spouse or partner will receive your estate.
Generally, the survivor in a relationship (where no will) must apply to the courts for an administrator to be appointed. The survivor has a prior right but may not wish to be the administrator.
The Government via the Public Trust is only the very last resort if all other avenues are exhausted. Generally, the surviving spouse/partner, any children, and, perhaps the deceased parents receive portions of the estate but only after administration has been completed. This may take a considerable amount of time and expense.
There is more to organising yourself than just having a will. Anyone who has accumulated or intends to accumulate wealth during their lifetime should also have a wealth management (estate) plan.
Many benefits are achieved through estate and asset planning:
• Protection from financial risks.
• Protecting personal assets from business risk.
• Protecting personal assets from relationship risk.
• Looking after loved ones in the future.
• Estate administration cost savings.
• Taxation savings.
• The most important advantage in wealth planning is receiving a comprehensive range of recommendations specific to your circumstances. It is not a one-size fits all approach. It is a process.
Information gathering:
• Explore short, medium and long-term goals. For example pay off debts, emergency funds, update qualifications, marriage, holiday home, owning own business, selling house/business, where to retire, etc.
• Analyse information collected.
• Explore options.
• Make recommendations.
• Implement.
• Review as circumstances change.
It is not just about forming a trust and thinking it will take care of everything. Other options such as the way wills are written, Enduring Powers of Attorney, Property Sharing Agreements, companies and even insurance, as well as trusts, all need to be considered. A trust may not be your best option. Your lawyer, accountant and financial adviser should be involved.
(The author acknowledges Trusts: A Kiwi Sham? by Mark Maxwell, 2007, for information in this article).
• Peter Smith is an Authorised Financial Adviser and the Principal of Kepler Group Otago Limited. Email: pete@keplergroup.co.nz
A disclosure statement is available on request and free of charge.
