NZX Adviser key terms

A prescribed document a product provider must give retail investors before they invest, summarising key features, risks, fees and conflicts so the investor can make an informed decision under New Zealand's financial markets conduct regime.

A business entity licensed to give regulated financial advice through nominated advisers. It carries the licence obligations, including duties of care, record keeping, complaints handling and ensuring advisers are competent and supervised.

Any person or entity that gives regulated financial advice to clients, whether as a sole adviser, a partnership or a firm. The term captures the business rather than the individual adviser.

An individual authorised by a licensed financial advice provider to give regulated advice on its behalf. They must meet competence, training and conduct standards and are subject to the provider's supervision.

The conduct standards set for licensed financial advice providers and their representatives, covering ethical behaviour, client interests, competence, disclosure and handling conflicts. Breach can lead to licence conditions or disciplinary action.

The rules and expectations governing how participants behave in the market, including fair dealing, prohibition on misleading conduct, insider trading controls and orderly trading. Regulators enforce these to protect market integrity and investor confidence.

Trading or tipping others to trade in securities while in possession of material information not generally available, or information that would likely affect the price if disclosed. It is prohibited and carries criminal and civil penalties.

Conduct that creates a false or misleading appearance of trading activity or price, such as wash trades, spoofing or ramping. Prohibited because it distorts price discovery and harms other investors.

Information that a reasonable investor would expect to affect the price or value of a security, or that would influence a decision to trade. Issuers must disclose it promptly under continuous disclosure rules.

The obligation of listed issuers to release material information promptly and without selective briefing, so all investors trade on the same information. It supports fair and informed markets.

The onboarding process of collecting and verifying a client's identity, circumstances, objectives, financial position and risk tolerance. It underpins suitability assessment and anti-money-laundering compliance.

The judgement that a recommended product or strategy fits the client's goals, time horizon, financial capacity and willingness to bear risk. It must be based on adequate information gathered during onboarding.

A client's willingness and ability to accept investment losses or volatility in pursuit of returns. It combines emotional comfort with financial capacity and shapes the appropriate asset allocation.

The financial ability of a client to absorb losses without derailing their goals, based on income stability, assets, liabilities and time horizon. It may differ from their emotional willingness to take risk.

The period over which a client expects to hold investments before needing the money. It influences asset allocation because longer horizons generally allow more exposure to growth assets.

The obligation to tell clients about commissions, ownership links, referral arrangements or other incentives that could bias advice. Disclosure must be clear, timely and specific enough for clients to judge its effect.

Informing clients how the adviser is paid, including commissions, fees, soft dollar benefits and volume-based incentives. It helps clients understand what may influence a recommendation and supports informed consent.

The primary equity market of the New Zealand Exchange for established companies, with listing rules covering minimum capital, spread of shareholders, disclosure and governance. It is the main venue for listed New Zealand shares.

A firm authorised by the exchange to trade directly on its markets, acting for clients or itself. Participants must meet capital, conduct and operational requirements and are bound by market rules.

The process of transferring cash and legal ownership of securities after a trade is executed. In New Zealand equities settlement typically occurs on a T+2 basis through the central securities depository.

An institution that holds securities and cash on behalf of clients, handling settlement, corporate actions and safekeeping. Custody arrangements affect how investors exercise voting and ownership rights.

The person who ultimately owns or controls securities, even if they are registered in another name such as a nominee or custodian. Beneficial ownership determines entitlement to economic benefits and voting direction.

A valuation measure dividing a company's share price by its earnings per share. It shows how much investors pay for each dollar of earnings and is used to compare relative value across companies or over time.

Annual dividends per share divided by the share price, expressed as a percentage. It indicates income return from an equity investment and is a key input for income-focused portfolio construction.

A company's profit attributable to ordinary shareholders divided by the weighted average number of shares on issue. It is a core profitability measure used in valuation and ratio analysis.

The extra yield a bond offers over a comparable risk-free government bond, compensating investors for default, liquidity and other risks. Wider spreads signal greater perceived credit risk.

The total annualised return an investor receives if a bond is held to maturity, assuming coupons are reinvested at that same rate. It reflects price, coupon and time to maturity.

A measure of a bond's price sensitivity to interest rate changes, roughly the percentage price move for a one percentage point shift in yields. Longer duration means greater interest rate risk.

The exchange's market for listed bonds and other debt securities, giving issuers access to capital and investors a secondary market. Listing rules require disclosure of terms, security and issuer information.

A pooled investment vehicle in which investors' money is combined and managed by a licensed manager under a governing document. Investors hold units and the scheme is subject to supervision and disclosure requirements.

The licensed entity responsible for investing a scheme's assets according to its mandate and strategy. It owes duties to investors, must manage conflicts and reports performance and holdings.

The value of one unit in a managed fund, calculated by dividing the fund's net asset value by units on issue. It is used when investors buy or redeem units.

The total value of a fund's assets minus its liabilities, often expressed per unit. It forms the basis for unit pricing and for assessing whether an ETF trades near its underlying value.

A fund whose units trade on an exchange like shares, typically tracking an index. It offers intraday pricing and liquidity while holding a diversified portfolio, with fees usually lower than active funds.

The volatility of the difference between a fund's returns and its benchmark index return. Low tracking error indicates close index replication, while high values suggest sampling, costs or active deviation.

The division of a portfolio among asset classes such as cash, bonds, property and equities. It is a primary driver of long-term return and volatility and is set according to goals and risk profile.

Spreading investments across assets, sectors and regions to reduce the impact of any single holding's poor performance. It lowers specific risk but does not remove broad market risk.

Risk that affects the whole market and cannot be eliminated by diversification, such as interest rate shifts, recessions or geopolitical events. Investors are compensated for bearing it through expected returns.

A financial contract whose value depends on an underlying asset, rate or index, such as a future, option, swap or forward. Derivatives can hedge risk or create leverage and carry counterparty and market risk.

Taking a position that offsets an existing risk exposure, for example using futures to protect a share portfolio against a fall. It reduces risk but also limits potential gains and has its own costs.

Using borrowed money or derivatives to increase exposure beyond the capital invested. It magnifies both gains and losses and can trigger margin calls or forced liquidation in adverse markets.

Collateral a client must deposit with a broker or clearing house to cover potential losses on leveraged or derivative positions. Variation margin is called as prices move against the position.

Tax credits attached to New Zealand company dividends representing company tax already paid. Resident shareholders can use them to offset their own income tax, reducing double taxation of dividends.

The tax rate applied to income earned through a portfolio investment entity, based on the investor's taxable income and total portfolio value. Using the correct rate avoids over- or under-payment.

A New Zealand investment vehicle taxed at the investor level using prescribed investor rates rather than entity level. It allows gains on certain investments to be taxed at a capped, consistent rate.

A voluntary workplace savings scheme for retirement and first-home purchase, with member, employer and government contributions. Default and chosen funds apply, and withdrawals are generally locked until eligibility age.

A legal obligation to act in another party's best interests, placing their interests ahead of one's own. Advisers and fund managers may owe such duties depending on the relationship and applicable rules.

A conduct standard requiring advisers to prioritise the client's interests when giving advice, including choosing suitable products and managing conflicts. It complements suitability and disclosure obligations.

The framework of identity verification, transaction monitoring and suspicious activity reporting that financial institutions must follow to prevent money laundering and terrorist financing.