Mr Alexander, who has been an authorised financial adviser (AFA) with Bradley Nuttall for the past 15 years, said the emerging Barry Kloogh situation had shocked the entire industry.
"But it does reinforce the critical importance of having a custodial relationship in place for the investor.
"AFAs don't need to touch the funds. In terms of process, as a partner firm to Consilium NZ Ltd, which provides investment support services directly to our clients, our client funds are paid directly to FNZ, New Zealand's largest custodial platform with more than $100billion in client assets worldwide."
Mr Alexander said once the money was in the client's account, Bradley Nuttall would provide instructions to invest in one of the model portfolios. "How the investment is structured is dependent on the requirements, financial status and risk profile of the client."
He had "absolute confidence" in Consilium in its role of providing independent research and asset allocation.
"As the largest provider of these service to IFAs [independent financial advisers] in New Zealand, Consilium provides an effective means for AFAs to access wholesale and institutional managed funds not easily accessed by individual investors."
Outside of dealing with a reputable AFA with a clear custodial relationship to ensure safekeeping of portfolio assets, Mr Alexander suggests investors should, as a matter of course, be provided with regular reviews of their investment portfolio relative to their objectives, with the ability to rebalance the portfolio as required
"They should also be clear on the structures in place for managing the portfolio, including investable asset classes, asset allocation guidelines and ensuring overall diversification and investment return," he said.
"The role of a reputable AFA is to gain an understanding of clients, their risk appetite and their future needs, rather than directly establishing their mix of investments."
While ultimately there was no investment certainty, investors should be provided with the option of different portfolios.
"Those with lower expected returns generally provide greater certainty of long-term return, while a portfolio with a higher expected return comes with less certainty.
"Ultimately, we know that time smooths volatility, and the difference in return by even 1% over 30 or 40 years can make a phenomenal difference to your overall return.
"At the end of the day, investing is easy if you stick to guiding principles."
