As we approach the festive season and look forward to spending time in the company of family and friends, the events caused by the eruption of Whakaari (White Island) seem all the more tragic. For those people caught up in this event, what should have been an interesting and exciting end to 2019 has ended in suffering and grief. To me it is a salient reminder that in life we run risks all the time. Sometimes we take these risks knowingly and at other times we do this through ignorance. The reality is that when we don’t experience a negative consequence personally we can easily become complacent; we end up discounting the true risk that we are taking. I was recently talking with a client who works as a chemical engineer in petroleum exploration. He was explaining that in their industry there are some potential outcomes that are so horrendous, that merely reducing their probability is not enough. The goal has to be the practical elimination of those risks. As an adviser, I encou...

Source of data Speed and a lack of friction costs are essential for an efficient market. Since its inception in 2010 (two years after KiwiSaver was launched) the number of members in the NZ Funds KiwiSaver Scheme has grown year on year for nine years. As our scheme has never sought default status and never acquired another scheme, the growth has been entirely organic. New members have primarily joined by switching from other providers. In total, NZ Funds has attracted 6,880 members and lost 1,520 members – small in comparison to default funds – but big enough to gather information on over 1,000 switches to the NZ Funds KiwiSaver Scheme in the last 30 months. After scrubbing this data for errors, outliers and PIE tax rebates, we discovered the KiwiSaver industry can be divided into two types of managers: efficient operators, and those who appear to be gaming the system. The efficient operators Despite being criticised by the FMA in 2014 for poor sales practices when it come...

The Global Financial Crisis was so dramatic that it still looms large in the minds of many investors, almost as if it had only just happened. Anecdotally, there are investors with their money still waiting in the bank for a sign that the world is a safe place and that they can invest more widely. But while they have been waiting the Dow Jones Industrial Average in the United States, as an example, has grown around 300% since February 2007. More if dividends were reinvested. The 1987 share market crash had a similar impact on the psyche of New Zealanders. 30 years later it still comes up occasionally in meetings as a reason not to invest in shares. And yet the market has gone up by as much as 1,000% since. And the GFC has been added as a new reason – despite the NZX having returned approximately 350% since February 2009. Fear can be good. It's designed to keep us safe. We don’t even have to have direct experience - the stories of others can also affect us. And so it is with mar...

How socially responsible is your KiwiSaver manager? Advisers who have been in business for a decade or more will be aware of the power of fads, or as they’re commonly marketed in finance: investment themes. Investment themes are powerful because they can be packaged into a product and used to raise capital. In the early 90s it was Pacific Basin funds, then emerging markets, followed quickly by technology in the 2000s and more recently, highly cyclical commodities such as gold, water, forestry, milk - and avocados of all things. Some managers appear to have approached socially responsible investing in the same way, by treating it as a fad with which to raise capital. This is a mistake. Millennials get the most attention for values-based investing, but there is growing interest from the older and much wealthier Generation X. In 2018 NZ Funds surveyed New Zealanders to see what mattered most to them when investing. ESG (environmental, social and governance) rated first, ahead ...

Time is money. So said Benjamin Franklin in 1748 in an essay titled Advice to a Young Tradesman 1 . And while he was not alluding to retirement savings his quote is directly applicable. Visually I was reminded of this in contemplating a tape measure this week. Take the tape measure in both hands. Your left hand will be at zero and put your right hand, let’s say, at 90 centimetres. This, we will assume, is the span of your life. Move your right hand back to 65. The age at which you will probably retire, give or take. And very likely you will cease to earn a wage from that point. So, nearly 40% of the tape is now unavailable for saving. That percentage made an impression on me. What you have saved to that point plus National Superannuation is what you’ve got to fund the remainder of your lifetime. Now move your left hand to the number which is your age right now. From a retirement savings perspective a good start is if there is still a gap between your hands. But it will be clear...