Why asset allocation and advice beat everything else. Financial advice is much like other professional services; if clients put their mind to it they could probably do most of it themselves. Little of it is rocket science. But just as we don’t want to spend our weekend doing the family’s tax returns, writing a will or establishing a trust, an increasing number of New Zealanders are embracing the use of a financial adviser to ensure they get the basics right. So, if you have decided to make a living advising others what to do with their money, you will want to know the best way to grow your clients’ wealth, and then recommend that to as many clients as possible. The good news is, in our view, the formula for success as a financial adviser is surprisingly simple. What is also surprisingly simple is that experts around the world from Buffett to Bogle agree that it has little to do with active or passive, global or local, choice of manager or how much they charge; and

Financial markets over the last few years have enjoyed the equivalent of a 'long hot summer' characterised by calm weather and warm sunny days. From experience, we all know that long hot summer days can occasionally encourage excess in the form of too much sun or fun. The same excess is also a risk for financial markets and the wider economy. Locally the good times are obvious in the number of cranes on the skylines of our major cities and in the difficulty of finding staff. The United States is also seeing similar capacity constraints as labour market surveys show there are more job openings than there are unemployed. There is a saying that financial bull markets do not die of old age. Instead, they end due to a combination of capacity shortages constraining growth and central banks increasing interest rates to counter the risk of rising inflation. In the United States this process in now well under way as the Federal Reserve has raised interest rates eight times alr

It was back in September that I started this column series to identify the behaviours of financially successful people. I started with those clients in their twenties and then moved through the subsequent decades considering the various 'markers' at each point. If we assume that you have now made it to age 65, then you are entering what I term the active post paid work phase. You will notice that I have avoided the use of the 'r' word. Today the concept of a traditional retirement, complete with a gold watch, is largely a thing of the past. I now more often see a phased transition from full time employment to an active retirement which includes a mix of paid and voluntary work.  This phased transition from full employment to full retirement allows for both economic and emotional adjustment. This is a time when the habits and behaviours previously established (both money and health) either start to pay 'dividends' or the reality that we have not do

Mid-January 2019. This is the latest date announced for when the UK Parliament will vote to approve (or not) the Brexit agreement already agreed between the UK Government and the European Union (EU) leaders on November 25. This vote will occur after Parliament has debated the government motion to approve the EU withdrawal agreement and accompanying political declaration. This delay was after it became clear that, based on stated views of many Government MPs, there seemed minimal likelihood the motion would be approved With a ‘no deal Brexit’ a clear possibility (and using British historical analogies) the key question in my mind is; ‘Will Brexit be akin to the evacuation from Dunkirk – a triumph in the midst of a dramatic defeat that ensured Britain could fight on, or will it be like the fall of Singapore - a calamitous disaster that had an irreversible and materially negative impact on the British Empire?’ On November 29 the Bank of England (BOE) Governor Mark Carne

What will your retirement look like? What will you do? How will you continue to provide meaning to your life, purpose? And what for you will be the physical, intellectual, and spiritual goals that those who continue to thrive as they age challenge themselves with? Money is the engine that drives many of our ambitions. But this isn’t a money discussion. Its what we can do with our money that is valuable. Our conversations should be about purpose. And if I had to define for me what a financial planner can do then that is it. To help with the decision of why you want the money in the first place. And in defining a future life to determine how big or small your retirement fund needs to be. And when. Which seems much more efficient than an any road will do approach. What if the future life you defined meant that you could, and were excited to retire early? Or a deliberate choice to work longer. Or perhaps a blended approach – working but with extended experiences and breaks. L

Over recent months this column has summarised my thoughts on the key behaviours that help people ‘be good with their money’ as they journey through life. So far, I have considered what financial success might look like for those in their twenties and how this evolves as we move through our thirties and our forties . This month I will cover the period loosely called middle age - the 15 years between 50 and 65. In financial terms I label this period ‘the age of realisation’ – but more of this later. Firstly a recap; in our twenties it is all about learning to live within your means and starting to find that balance between enjoying today and planning for tomorrow. This includes; balancing your finances, establishing a savings pattern, understanding the implications of debt, writing a will, understanding insurance and giving something back - perhaps through voluntary work. For most people in their twenties formal planning will be limited to establishing KiwiSaver and setting rela

Let us cut to the chase, KiwiSaver was formed to ensure New Zealanders could self-provision for retirement. Its predecessor, NZ Super, which relies on tax payers funding the generation ahead of them, is failing. One need only reference the Westpac-Massey-Ed Centre’s annual Expenditure Guidelines study to see NZ Super’s current 'inflation adjusted' payment level does not meet a 'no-frills' lifestyle, or The Treasury’s projection that 27% of the population will be 65+ in 2060, up from 15% today. Only 58% of the population is expected to be between 15 – 64 meaning every retiree will be supported by just two working age people. Today there are 4.3 working age people per each retiree 1 . About the only people not to acknowledge it are the politicians. Financial advisers, unfortunately live in the real world and must face reality on almost a daily basis. It is therefore amazing that after nine years, and $55 billion of savings in, the most basic question, “What contri

When thinking about the challenges of managing one’s finances, I am reminded of two statistics. According to author Malcolm Gladwell, it takes 10,000 hours of study to become an expert in any given field, and conventional wisdom tells us that it takes just 21 days of repeat behaviour to create a habit. I take solace from the 21 days it takes to create a habit—clearly you don’t have to be an expert to be financially successful, but you do need to adopt the right habits. In last month’s column I reflected on the habits of financially successful people by considering those in their 20s. In this column I will focus on the age group 30 to 45. A friend refers to this stage of her life as being, “the ·age of the unfinished sentence”. It is certainly a time when we are being pulled in every direction by competing pressures: family, careers, relationships, community and finances. I believe that the ‘three buckets’ principle, which I discussed in last month’s column, should be a consist

After a strong run from markets, the end of the cycle is approaching. The New Zealand economy is now showing signs of slowing yet New Zealand shares continue to outperform. We look at the implications for investors in a rising interest rate environment with commentary on NZ Funds’ downside mitigation approach in our latest Investment Report.

KiwiSaver is rapidly proving as much of a bonanza for the marketing industry as it is for the wealth management industry. Some providers are spending seven figures annually to promote their various investment propositions. And as one would expect, if you let the ad executives loose, the key messages are, well… 'loose'. In addition to surveying clients to determine what they want out of KiwiSaver (see Good Returns article What New Zealanders want from KiwiSaver may surprise you ), NZ Funds has been researching what really determines how much money a KiwiSaver member retires with. The answers are logical and intuitive to long-term practitioners of financial advice, but will no doubt come as a shock to fans of Mad Men. To answer the question: "What matters most in maximising KiwiSaver by retirement?" the NZ Funds Wealth Technology Team started with an 18 year old on the average full-time youth earnings of $38,324 per annum. The 18 year old’s earnings increase

If we are living longer what does a good life look like? A paper from the Pensions Policy Institute in the UK, entitled Living the Future Life 1 explores just this issue. If our plan is one of growing to adulthood, followed by 40 years of work and family and then 20 years of retirement we might need to rethink. In a longer life the boundaries between study, work, family and leisure will likely become blurred. A multi stage life could include multiple career transitions and gradual, flexible retirements. Families will commonly be up to four generations. With a longer life comes opportunity as well – we will have greater choice in how we live our lives. But we will need to be proactive. We don’t want to be older for longer, but younger for longer. Being proactive means taking steps to improve our work opportunities, our health and social care, our family and our social networks. Relationships are central to people’s lives, and good health and wellbeing are reliant on

As a financial adviser it has been my privilege to work with clients who have built significant wealth. This has taught me that there are many different paths to financial independence. When I look back on almost 30 years of helping people with their finances there are some striking similarities between those that have been successful. I have concluded that life is a balancing act between, enjoying the life you have now while at the same time building the future. As we pass through our earning years; early adulthood (20 to 30), mature adulthood (30 to 45) and middle aged, say (45 to 65) I believe that there are various ‘markers’ or lessons that can be helpful when charting our financial progress. As a series of column topics I thought it might be interesting to examine each phase to identify the issues that financially successful people learn early. So let’s start at the beginning - the 20 to 30 year old age group. If you get the foundational behaviours right here then the

As the end of the decade draws closer, independent advisers face a dual threat: further regulation and lower returns. While considerable debate surrounds the introduction of the new rules for financial advisers, returns may prove the bigger threat to incomes. How advisers and managers navigate these dual threats will likely determine who the industry’s winners and losers will be. Low returns are an insidious threat. Investors, and their advisers, have enjoyed a great run. Since the end of the Global Financial Crisis in March 2009, investors have enjoyed strong investment returns, both here and internationally. The NZX50 Index has risen 317%, while the global share market (MSCI ACWI Index) has returned 245%. During the same period (March 2009 to August 2018) New Zealand and international interest rates have fallen, generating capital gains for long-term bond holders. Share and bond valuations indicate that both asset classes are now between 1.3 and 2.4 standard deviations above t