Just last week the Westpac Massey Fin-Ed Centre published the results from a study 1 tracking the financial literacy of New Zealanders. This study follows the same approach used by the world famous ‘Dunedin Study’  2 that is studying health outcomes. The study focusses on the financial literacy of approximately 230 New Zealanders born between 1990 and 1994. It started in 2012 and it plans to interview the same participants every five years until 2032. The second series of interviews occurred last year and it is revealing some interesting trends. The participants are now aged 24 to 28. The good news is that, contra to the stereotype of ‘Gen Y’, the group is making financial progress. Their level of participation in KiwiSaver is 89%, on average they have a healthy disrespect for debt and just over half of the participants had reported taking steps over the last 12 months to improve their money management skills. What I found most interesting from the results is...

Socially responsible investing has come a long way in New Zealand since KiwiSaver providers scrambled to adopt a no nuclear weapons, tobacco, cluster munitions or landmines approach, but unfortunately this is where some KiwiSaver providers still draw the line. Few New Zealanders want to build their retirement wealth by investing in companies that violate human rights or cause catastrophic environmental damage. But if the companies behind these actions are not producing landmines, nukes or tobacco, their shares could be owned by some of the KiwiSaver Schemes available in New Zealand today. NZ Funds, manager of the NZ Funds KiwiSaver Scheme, has taken a different approach by partnering with global giant Institutional Shareholder Services Inc (ISS). ISS is the world’s leading provider of corporate governance and responsible investment solutions for asset owners and managers. ISS covers both local and internationally listed companies. ISS employs over 1,100 employees across ...

The development of a financial plan involves many assumptions. Some relate to average rates of return for asset classes, others pertain to such things as inflation rates and living costs. For those in the pre-retirement phase there is also the timeframe over which investments will be made before retirement and then, in most cases, consumed post retirement. Using these assumptions, a planner can identify a ‘wealth target’. This can be defined as the future lump sum that must be accumulated by retirement to enable the individual (or family) to enjoy the quality of life, and length of retirement, they aspire to. As you would guess, this figure is different for everyone. It is critical that the assumptions used in this calculation of the wealth target are carefully considered, as relatively small changes can have a significant impact on the final figure. There is, however, one assumption that is sometimes not properly questioned. What would happen if you were not able to mak...

I suspect that most people only seek financial advice when two specific ‘triggers’ are met; they realise that they are facing questions that they cannot easily answer, and they have met a point in their financial affairs where seeking specialist knowledge seems wise. Often this occurs when regular savings have reached a specific point, mortgage debt has been significantly reduced or perhaps an asset has been sold or matured. However, over recent months I have been approached by an increasing number of clients where the trigger for advice has been where families have been helping their aged parents deal with the issues involved in moving into a retirement village or rest home care. What is interesting about this advice is that it highlights the difference, and interplay between, investment versus lifestyle decisions. As financial advisers we are very good at calculating such things as; internal rates of return and the risks that might be involved in any given investment. Th...