Let me share with you a quite-good Christmas cracker joke:
"Doctor! Doctor! I keep thinking I'm Tom Jones."
"Don't worry...it's not unusual."
It's also not unusual to be skint after Christmas because it's an expensive time.
If you are an employer, this really affects you.
If a household is sailing close to the wind, Christmas can move it into trouble. The person who earns the income for the household will reflect on how hard they work and how they never seem to get ahead financially.
Their thoughts immediately turn to how much money they earn. That's where the income comes from - so it's natural to go directly to the source. Indeed, many well-meaning personal finance commentators advise to "negotiate a pay rise" as the first basic step to get financially sorted.
So then the next thought might be a pay rise request. Or they may even start to look around for a better paid position elsewhere.
If the need is a bit more immediate than that, their next thought may be to approach you for an advance on pay. This is very, very common (i.e. it's not unusual). The employer doesn't usually charge interest and there are no forms to fill in.
A lucrative money lending industry is booming on the back of this. Payday loans, cash now, can'twait dot com. On a TV ad last night, I even heard the slogan "where to go, if the boss says no!". I think this is unbelievably irresponsible. Let's remember that these companies charge at least 500% a year in interest - and much, much more if repayments are missed. Yes that does say 500%. Five hundred per cent.
If you are an employer, this really affects you. I know I am repeating myself - but it really does.
As an employer, you will sympathise with your employees - but a household that is in financial distress is not caused by how much you may pay them. But you can help them.
Have a Sorted session at work about managing debt. You can do it yourself, or I can do it for you.
The information given at a Sorted session shows people what to do and where to go if they need some help. Most of the time, it is getting people back on course. Non-preachy, jargon-free and nobody is trying to sell them anything.
The sessions give people hope and show them that you are on their side.
Sunday, December 29, 2013
Friday, December 13, 2013
Can you lend me $100?
I promise I'll pay you back as soon as I can...
Thanks!
Let's fast forward several years. You bump into me in the street. I am dressed as a woman, I have a wig on, I have changed my name and I am affecting a limp. Yet you still recognise me (dammit) and ask for the $100 back.
In my new Jamaican accent, I deny everything because I am weaselly, oily ratbag who cannot be trusted with other people's money - and besides, I'm called Glenda now. I also know it will cost you a lot more than $100 to prove that I actually owe you that money. So you give up. One-nil to me.
Let's be under no illusions, the finance company collapses have followed this broad narrative arc.
The good news is that there have been several successful prosecutions, and I think the regulators are winning the battles that they can win. But when they have to walk away, there is an empty, impotent feeling of disgust that no-one is held personally accountable.
These people rely on the protection afforded by setting up entities/trusts and whatnot to legally separate and de-personalise the financial risks they take, if it all goes wrong. When it works, it's lollies ahoy for the people involved, personally. But when it fails, it is the entity that fails, not them personally.
Sorry for the language, but these wankers destroy successful companies, spirit away people's life savings and damage the fragile reputation of the financial services industry, which is actually full of sincere and well-meaning people.
This feeling is bad enough when it's only about money. How must the Pike River families feel?
Things must change.
Thursday, October 17, 2013
Why is KiwiSaver like a big fluffy onesie?
In a week where the peccadilloes/shenanigans of public servants are in the spotlight, I am pleased to say that the more mundane work of Bill English and Craig Foss has delivered a series of sensible decisions about the future default providers of KiwiSaver. It's all here .
This is clearly not big, exciting and sexy news to most. When the public were asked for submissions about snapper fishing or tobacco branding, tens of thousands of people chimed in. When it came to asset sales, a whopping 327,000 people signed up to force a citizens' referendum.
When the Government asked about KiwiSaver default provider requirements, there were 29 responses. 29. Twenty-nine.
But let's be positive. When people think about KiwiSaver, is it because they are thinking wholesome, soothing thoughts? Quite possibly. While day to day financial challenges are frustrating and stressful, KiwiSaver members have seen their long term savings continue to build up.
People who invest lump sums aggressively for a quick gain seem to let money run their lives. Anxious eyes dart over streaming online numbers, hearts miss a beat due to something unfathomable happening to the markets. If I remember my school Bible "studies" correctly, it is the love of money that is said to be the root of all evil.
It should be simple and stress-free. KiwiSaver is not meant to be a white knuckle ride, unless you want it to be. This is why I am pleased that people are not going to be defaulted into high risk funds without their informed permission.
Another good development is that impartial financial education is now to be a requirement of a default KiwiSaver provider from July 2014. Yay.
I know real people that have used KiwiSaver to help buy their first home. Others have started to enjoy the money that they have saved. I met a young father at a factory, who got me to look into whether he was in KiwiSaver. He then found that he had $8,000 saved! He - literally - jumped for joy. It's not an idea any more, it's part of our lives and it is really working.
It's a big, fluffy onesie and everyone should have one.
This is clearly not big, exciting and sexy news to most. When the public were asked for submissions about snapper fishing or tobacco branding, tens of thousands of people chimed in. When it came to asset sales, a whopping 327,000 people signed up to force a citizens' referendum.
When the Government asked about KiwiSaver default provider requirements, there were 29 responses. 29. Twenty-nine.
But let's be positive. When people think about KiwiSaver, is it because they are thinking wholesome, soothing thoughts? Quite possibly. While day to day financial challenges are frustrating and stressful, KiwiSaver members have seen their long term savings continue to build up.
People who invest lump sums aggressively for a quick gain seem to let money run their lives. Anxious eyes dart over streaming online numbers, hearts miss a beat due to something unfathomable happening to the markets. If I remember my school Bible "studies" correctly, it is the love of money that is said to be the root of all evil.
It should be simple and stress-free. KiwiSaver is not meant to be a white knuckle ride, unless you want it to be. This is why I am pleased that people are not going to be defaulted into high risk funds without their informed permission.
Another good development is that impartial financial education is now to be a requirement of a default KiwiSaver provider from July 2014. Yay.
I know real people that have used KiwiSaver to help buy their first home. Others have started to enjoy the money that they have saved. I met a young father at a factory, who got me to look into whether he was in KiwiSaver. He then found that he had $8,000 saved! He - literally - jumped for joy. It's not an idea any more, it's part of our lives and it is really working.
It's a big, fluffy onesie and everyone should have one.
Saturday, August 3, 2013
Regulating Financial Advisers - The Good News
Before 1 July 2011, anyone could call themselves a financial adviser. New Zealand's main regulator of the industry, the Financial Markets Authority (FMA) didn't know how many financial advisers there were or what exactly they did. You could call yourself a financial adviser but actually run a cheese shop!
This is how the NZ version plays out in 2013:
FMA - "Are you a financial adviser?"
Financial Adviser - (brightly) "Yes! How can I help you?"
FMA - "Do you give advice on...budgeting?"
Financial Adviser - "Er...no, not really."
FMA - "Do you help people manage debt?"
Financial Adviser - "No...not a lot of call for it around here."
FMA -"Do you give advice on...KiwiSaver?"
Financial Adviser - "Sadly not...not a great deal of money in it, see."
FMA - "What about tax planning?"
Financial Adviser - "Not...as...such."
FMA - "How about investments?"
Financial Adviser - "Not so much these days, no."
FMA - "Shares?...foreign exchange?...bonds?"
Financial Adviser - (shakes head silently at each)
FMA - "Mortgages?"
Financial Adviser - "Again, not me as such...but I do know someone."
FMA - (a long pause) "Oh. (clicks fingers) Of course! Insurance?"
Financial Adviser - (relieved) "Yes! Yes! Insurance, yes!"
(they both laugh)
FMA - "Good! Car insurance?"
Financial Adviser - "No! Not car insurance!" (snorts)
FMA - "House and Contents insurance?"
Financial Adviser - "No! Well, not me personally...but I can refer you."
FMA - (really struggling now)"... erm....Life Insurance?"
Financial Adviser - "Bingo! Good morning, how can I help you?"
So this financial adviser only sells life insurance policies. Most people need life insurance and having a trusted expert to help them is necessary. There is nothing wrong with that.
A few years ago, before the regulations, the man behind the counter could have legally said "yes" to any of those questions and earned commission from providers. That isn't true now.
So that's good news. These days, a financial adviser is far more upfront about what they do. And usually they will tell you straight away without the (Spanish) inquisition.
In fact...there's a Monty Python sketch called "Cheese Shop" where the man behind the counter eventually admits, after a painfully long time, that his shop doesn't actually sell any cheese.
This is how the NZ version plays out in 2013:
FMA - "Are you a financial adviser?"
Financial Adviser - (brightly) "Yes! How can I help you?"
FMA - "Do you give advice on...budgeting?"
Financial Adviser - "Er...no, not really."
FMA - "Do you help people manage debt?"
Financial Adviser - "No...not a lot of call for it around here."
FMA -"Do you give advice on...KiwiSaver?"
Financial Adviser - "Sadly not...not a great deal of money in it, see."
FMA - "What about tax planning?"
Financial Adviser - "Not...as...such."
FMA - "How about investments?"
Financial Adviser - "Not so much these days, no."
FMA - "Shares?...foreign exchange?...bonds?"
Financial Adviser - (shakes head silently at each)
FMA - "Mortgages?"
Financial Adviser - "Again, not me as such...but I do know someone."
FMA - (a long pause) "Oh. (clicks fingers) Of course! Insurance?"
Financial Adviser - (relieved) "Yes! Yes! Insurance, yes!"
(they both laugh)
FMA - "Good! Car insurance?"
Financial Adviser - "No! Not car insurance!" (snorts)
FMA - "House and Contents insurance?"
Financial Adviser - "No! Well, not me personally...but I can refer you."
FMA - (really struggling now)"... erm....Life Insurance?"
Financial Adviser - "Bingo! Good morning, how can I help you?"
So this financial adviser only sells life insurance policies. Most people need life insurance and having a trusted expert to help them is necessary. There is nothing wrong with that.
A few years ago, before the regulations, the man behind the counter could have legally said "yes" to any of those questions and earned commission from providers. That isn't true now.
So that's good news. These days, a financial adviser is far more upfront about what they do. And usually they will tell you straight away without the (Spanish) inquisition.
Thursday, July 25, 2013
What Means Testing Really Means
There seems to be a lot of commentary around the future affordability of superannuation in New Zealand recently. I am not saying it's perfect, but there's a lot to like. For one thing, there's no "means testing". You get to 65 and it is paid.
Means Testing is the catch-all cure-all that many people suggest. After all, it seems unfair that everyone gets NZ Super, no matter what. Perhaps only those who need it should get it?
We could introduce a threshhold so that only people with assets less than (say) $500,000 will receive NZ Super. But you know what will happen next. The more well-off people will arrange things in such a way that their declared assets will be exactly $499,999.
And it will be that blatant. There were some extreme tax breaks for superannuation some years ago and - oh yes - many of the Great and the Good marched through that loophole, twirling batons as they went. It's called "means testing" because "mean" people "test" the boundaries.
So...to solve that problem, in a means tested world, we would put in rules to make sure that kind of thing can't happen, right? Yes we would. And employ people and systems to ensure that each superannuitant doesn't have too many assets hidden away? Absolutely. We should also penalise those that try to rort the system? Too right!
So we now enter a world where senior citizens declare their assets on a regular basis to an agency like WINZ to qualify for their state pension.
Can't we give it - and them - a rest?
Saturday, July 6, 2013
Stupid Brain
For most of us, Sunday is a time for taking things a little more slowly and this allows the mind to reflect, ponder and take stock. How relaxing.
Or is it? The brain's default setting often seems to be "what's going to become of me?...what am I gonna do?". And then the brain races around trying to find something to worry about. Stupid brain.
The brain is so stupid that, even though you are in the top 1% of the richest people that have ever lived, it seems like it will find something, anything, to make you worry.
As a teenager, we worry about very silly things. When we grow up, we gather information that kicks most of those worries into touch. Wouldn't we all love to be 15 again for a day - back at school, with a confident, adult brain firing on all cylinders? Such fun!
So - the enemy of worry is information. Sharks are immediately scary because they have big teeth and everything.
But in terms of danger to you - you should be more afraid of a toaster! If you get information, - the worry goes away.
Money is the among the easiest things to worry about because you can quantify it. Therefore, everyone worries about money, because the brain finds it so easy to do.
And when we worry about money, we think about how much money we have. Niggling doubts about whether we are being paid enough...because if we get paid a bit more these worries disappear, right?
No. This is the brain being stupid again. People get promoted and get pay rises - but often they are still unhappy and they still leave. Only for the pattern to reoccur again and again.
So employers can help their people (and themselves) by giving their people information about money. Particularly if they are in a spot of bother with debt. Helping people by giving them information, gives them the message that their employer is on their side - and not part of the problem.
Or is it? The brain's default setting often seems to be "what's going to become of me?...what am I gonna do?". And then the brain races around trying to find something to worry about. Stupid brain.
The brain is so stupid that, even though you are in the top 1% of the richest people that have ever lived, it seems like it will find something, anything, to make you worry.
As a teenager, we worry about very silly things. When we grow up, we gather information that kicks most of those worries into touch. Wouldn't we all love to be 15 again for a day - back at school, with a confident, adult brain firing on all cylinders? Such fun!
So - the enemy of worry is information. Sharks are immediately scary because they have big teeth and everything.
But in terms of danger to you - you should be more afraid of a toaster! If you get information, - the worry goes away.
Money is the among the easiest things to worry about because you can quantify it. Therefore, everyone worries about money, because the brain finds it so easy to do.
And when we worry about money, we think about how much money we have. Niggling doubts about whether we are being paid enough...because if we get paid a bit more these worries disappear, right?
No. This is the brain being stupid again. People get promoted and get pay rises - but often they are still unhappy and they still leave. Only for the pattern to reoccur again and again.
So employers can help their people (and themselves) by giving their people information about money. Particularly if they are in a spot of bother with debt. Helping people by giving them information, gives them the message that their employer is on their side - and not part of the problem.
Thursday, July 4, 2013
Independence Day
I feel duty-bound to write something today. For today is July 4th, Independence Day. It is also the day my company, Truly Independent Financial Advice NZ Ltd starts operating.
The theme is Financial Health and Safety.
I offer fun and engaging sessions at the workplace that give people good information on how to spot financial hazards.
I can also offer the excellent Sorted presentations. I am accredited by (deep breath...) the Commission for Financial Literacy and Retirement Income to present these sessions.
Have a look at my website. I am proud to say my nephew did it.
Employers pay me for these sessions. So there's no selling of products, no commissions and no pressure. No, really.
Come along with me, why don't you?
The theme is Financial Health and Safety.
I offer fun and engaging sessions at the workplace that give people good information on how to spot financial hazards.
Have a look at my website. I am proud to say my nephew did it.
Employers pay me for these sessions. So there's no selling of products, no commissions and no pressure. No, really.
Come along with me, why don't you?
Friday, June 28, 2013
Unlikely inspirations
A week ago I went to an excellent conference organised by the Commission for Financial Literacy and Retirement Income. These are the people that bring you (among other things) the Sorted website.
Inspiration can came from the most unlikely of sources. I have never really been a fan of military stuff, largely due to the behaviour and intellectual calibre of the army trainees ("squaddies") that menaced my home town at the weekends when I was a teenager. We lived a few miles away from a very large army base in England. My interactions with squaddies were usually along the lines of whether I may have spilled their pint.
So, when Air Commodore Robert Brown from the Australian Defence Force was on the list of speakers, I wasn't expecting much.
Yet he turned out to be very inspiring.
He was saying all the things I wanted to say, doing the things that I want to do and demonstrating how valuable and life-changing financial literacy is to people. That's exactly what I think, too.
If I was given his time slot, I would have said the same things and made the same points. But I wouldn't have been as effective. Nowhere near. I am about to do it...and he has been doing it for years. I think it works...he knows that it does and can prove it.
Later on in the day, like a gushing teenager, I told him he was like a big blue angel flapping down from heaven. He gave me a funny look. On reflection, I am not surprised. He's about 6 foot 6, in full uniform and halfway through his lunch. I'd have given me a funny look too.
His sessions involve no selling, no jargon and no conflicts of interest. And they are very good. You can see them here .
They tried having financial services providers doing these sessions for free - but the audience
didn't really trust that they were getting truly independent information.
I like the practical sensibleness of it all - the unrefutable good common sense that runs through
the material.
The parallels with what my company, Truly Independent Financial Advice NZ, is going to do are remarkable.
In order to make a go of this, I need employers to agree that financial health and safety is important for their people.
Work is all about money - the financial health of employees is all-important.
I can be booked in from 4 July 2013. My website is here
Inspiration can came from the most unlikely of sources. I have never really been a fan of military stuff, largely due to the behaviour and intellectual calibre of the army trainees ("squaddies") that menaced my home town at the weekends when I was a teenager. We lived a few miles away from a very large army base in England. My interactions with squaddies were usually along the lines of whether I may have spilled their pint.
So, when Air Commodore Robert Brown from the Australian Defence Force was on the list of speakers, I wasn't expecting much.
Yet he turned out to be very inspiring.
He was saying all the things I wanted to say, doing the things that I want to do and demonstrating how valuable and life-changing financial literacy is to people. That's exactly what I think, too.
If I was given his time slot, I would have said the same things and made the same points. But I wouldn't have been as effective. Nowhere near. I am about to do it...and he has been doing it for years. I think it works...he knows that it does and can prove it.
Later on in the day, like a gushing teenager, I told him he was like a big blue angel flapping down from heaven. He gave me a funny look. On reflection, I am not surprised. He's about 6 foot 6, in full uniform and halfway through his lunch. I'd have given me a funny look too.
His sessions involve no selling, no jargon and no conflicts of interest. And they are very good. You can see them here .
They tried having financial services providers doing these sessions for free - but the audience
didn't really trust that they were getting truly independent information.
I like the practical sensibleness of it all - the unrefutable good common sense that runs through
the material.
The parallels with what my company, Truly Independent Financial Advice NZ, is going to do are remarkable.
In order to make a go of this, I need employers to agree that financial health and safety is important for their people.
Work is all about money - the financial health of employees is all-important.
I can be booked in from 4 July 2013. My website is here
Friday, June 21, 2013
Get Vulcan
Mr Spock has three ears. His right ear, his left ear, and space...the final front ear.
Apart from his superior hearing, what sets him apart is his logical mind. His lack of emotion, his judgement based on mathematical probabilities. He doesn't have gut feelings or hunches. He can't be swayed or persuaded by a boozy lunch, or have his head turned by charisma, flattery or advertising.
Which means he'd be very good with money. Mr Spock would find these things simply illogical:
1. Borrowing money to buy things you don't really need
2. Having sustained credit card debt
3. Lotto
4. Buying high and selling low
5. Paying full price at Briscoes
And yes, we know this too. The drawback here is that we are human beings - not Vulcans and we have "emotions" here on Earth. Spending money on something you know to be wasteful or reckless is a very human thing to do do.
With number 1 on the list, there is a complex emotional battle going on. You may buy a wonderful item on credit and now you have it! You deserve a treat, why not? There is a brief period of rejoicing and then the sheen wears off a bit.
A more sustained way to keep that emotional high is to save up for the item and pay for it. Once the initial thrill is gone, you still have the satisfaction of knowing it's all yours.
It feels good to buy nice things, but attaching too much emotion to money all the time can be a huge financial hazard. It can also be the most illogical. Emotions have been developed (I expect) as a result of an evolutionary need to interact with each other successfully. There is no practical use for money issues to be sprinkled with emotion. Do you feel any emotion when eating toast? You don't because you don't need to.
Sales teams all over the world are in meetings right now trying to find ways to "engage" you about money. Sales professionals want to establish an emotional connection because then you get a bit more relaxed and less picky.
Remove emotion as much as you can. If a sales person is getting excited, ask them to calm down. If they are probing you for details of your school days , they are trying to establish an emotional connection via banter - politely get them back on course. You're on to them.
Get Vulcan about money and live long and prosper.
Apart from his superior hearing, what sets him apart is his logical mind. His lack of emotion, his judgement based on mathematical probabilities. He doesn't have gut feelings or hunches. He can't be swayed or persuaded by a boozy lunch, or have his head turned by charisma, flattery or advertising.
Which means he'd be very good with money. Mr Spock would find these things simply illogical:
1. Borrowing money to buy things you don't really need
2. Having sustained credit card debt
3. Lotto
4. Buying high and selling low
5. Paying full price at Briscoes
And yes, we know this too. The drawback here is that we are human beings - not Vulcans and we have "emotions" here on Earth. Spending money on something you know to be wasteful or reckless is a very human thing to do do.
With number 1 on the list, there is a complex emotional battle going on. You may buy a wonderful item on credit and now you have it! You deserve a treat, why not? There is a brief period of rejoicing and then the sheen wears off a bit.
A more sustained way to keep that emotional high is to save up for the item and pay for it. Once the initial thrill is gone, you still have the satisfaction of knowing it's all yours.
It feels good to buy nice things, but attaching too much emotion to money all the time can be a huge financial hazard. It can also be the most illogical. Emotions have been developed (I expect) as a result of an evolutionary need to interact with each other successfully. There is no practical use for money issues to be sprinkled with emotion. Do you feel any emotion when eating toast? You don't because you don't need to.
Sales teams all over the world are in meetings right now trying to find ways to "engage" you about money. Sales professionals want to establish an emotional connection because then you get a bit more relaxed and less picky.
Remove emotion as much as you can. If a sales person is getting excited, ask them to calm down. If they are probing you for details of your school days , they are trying to establish an emotional connection via banter - politely get them back on course. You're on to them.
Get Vulcan about money and live long and prosper.
Tuesday, June 18, 2013
Pricking the residential housing boil
This rise in house prices is not a bubble - it's a boil.
Bubbles are nice, clean floaty things with a rainbow of colours on the outside. When the time is right - they pop. Children squeal with delight.
Boils are horrible things that fill with angry pus until they have no choice but to burst. When they do, it's repulsive and there's an awful mess. Eww.
I wish I could do just one thing. And that one thing may help prick the boil.
Before I tell you that one wish, allow me to explain why I think the whole business of buying/selling a house is a bit shabby at the moment.
If you want to talk to someone about *perhaps* buying a house, you would, quite reasonably, talk to your bank or a real estate agent. These guys are in the business and will offer good sensible advice...won't they?
Well...
Right now, real estate agents are having a great time, sensing that while the sun is shining - it's time to make as much hay as possible. Agents can have long periods of barren times. In a way, you can't blame them for making the most of it.
Banks are offering the lowest of interest rates and all kinds of incentives. Banks will not stop doing this. Home loans are very profitable and banks have highly focused sales people, targeted to sell as many of them as possible. Previous boundaries of sensible lending are being tested - again.
Right now, both of those parties have too much of a vested interest in getting that loan and that house purchase done for you. In this current environment, you should not expect a balanced chat with either the bank or agent about whether this is the right thing to do.
Once upon a time, buying a house was quite civilised. If the parties couldn't agree on price/terms, then it was never "meant to be". This is the right outcome for both buyer and seller.
Agents prefer auctions. Most of them push this option now, to the exclusion of every other method.
With auctions, a sale (any sale) happens far more often. In the high pressure environment of the auction room, a bidder may get carried away, or there is an ugly silence. The reserve price is not met and the seller feels forced to accept a subsequent lower offer rather than go through the humiliation (and cost) of an auction all over again.
Either way, there's a sale.
That's good for the bank and good for the Agents. They don't necessarily care that much about whether the actual sale price was $50K higher or lower. It makes very little difference to the agent's commission or the bank's lending targets.
Yes, more houses get sold - and the market therefore seems to be buoyant. I think it's a murky business and I feel that the public are corralled into situations that make them pressurised, stressed and vulnerable.
So my wish is to stop banks lending for properties that are up for auction. Or at least make the lending much harder to arrange.
Bubbles are nice, clean floaty things with a rainbow of colours on the outside. When the time is right - they pop. Children squeal with delight.
Boils are horrible things that fill with angry pus until they have no choice but to burst. When they do, it's repulsive and there's an awful mess. Eww.
I wish I could do just one thing. And that one thing may help prick the boil.
Before I tell you that one wish, allow me to explain why I think the whole business of buying/selling a house is a bit shabby at the moment.
If you want to talk to someone about *perhaps* buying a house, you would, quite reasonably, talk to your bank or a real estate agent. These guys are in the business and will offer good sensible advice...won't they?
Well...
Right now, real estate agents are having a great time, sensing that while the sun is shining - it's time to make as much hay as possible. Agents can have long periods of barren times. In a way, you can't blame them for making the most of it.
Banks are offering the lowest of interest rates and all kinds of incentives. Banks will not stop doing this. Home loans are very profitable and banks have highly focused sales people, targeted to sell as many of them as possible. Previous boundaries of sensible lending are being tested - again.
Right now, both of those parties have too much of a vested interest in getting that loan and that house purchase done for you. In this current environment, you should not expect a balanced chat with either the bank or agent about whether this is the right thing to do.
Once upon a time, buying a house was quite civilised. If the parties couldn't agree on price/terms, then it was never "meant to be". This is the right outcome for both buyer and seller.
Agents prefer auctions. Most of them push this option now, to the exclusion of every other method.
With auctions, a sale (any sale) happens far more often. In the high pressure environment of the auction room, a bidder may get carried away, or there is an ugly silence. The reserve price is not met and the seller feels forced to accept a subsequent lower offer rather than go through the humiliation (and cost) of an auction all over again.
Either way, there's a sale.
That's good for the bank and good for the Agents. They don't necessarily care that much about whether the actual sale price was $50K higher or lower. It makes very little difference to the agent's commission or the bank's lending targets.
Yes, more houses get sold - and the market therefore seems to be buoyant. I think it's a murky business and I feel that the public are corralled into situations that make them pressurised, stressed and vulnerable.
So my wish is to stop banks lending for properties that are up for auction. Or at least make the lending much harder to arrange.
Friday, June 14, 2013
Adorable KiwiSaver advice
Hope you enjoy this. I created it for free from the www.xtranormal.com website.
The site allows you to create your own cartoon with almost infinite array of characters and situations. Given that, the fact that I chose to create a cartoon about KiwiSaver is a little sad. I know.
http://m.youtube.com/watch?v=bJICa4C_rY0
Friday, June 7, 2013
Transferring Aussie super to KiwiSaver
It was great to hear that from 1 July 2013, you can start to organise the transfer of Australian superannuation scheme benefits over to KiwiSaver. If you have worked in Australia over the last 20 years, you probably have a few thousand dollars knocking around over there.
I will have more detailed stuff in later posts, but my main general guidance at this point is to wait. The providers are now scrambling to get ready in time for 1 July. Many of them may not make it by that deadline, but that doesn't mean they're bad providers. They have been given very little to time to get the right systems in place.
Once everyone is ready, you can make a better assessment of who might be the best KiwiSaver provider to take on your Australian superannuation transfer. I would give it until the end of this year. Have a good look in 2014 - all the main KiwiSaver providers should be ready by then.
In the meantime, if you have lost track of where your Aussie super is, consider using the free Super Seeker online service from the Australian Tax Office. Here is the link:
http://www.ato.gov.au/individuals/content.aspx?doc=/content/33301.htm&alias=superseeker
I only mention this because I have noted some excitement from providers who are gearing up to charge the public to do this. Like the tax refund companies, you can do it yourself. It is all online and it isn't that hard.
In later posts, I will also ask you to consider what you might be giving up. Does your Aussie super carry with it any guarantees? For example, some funds might have built-in inflation proofing, underwritten by the Government. You will lose all of that on transfer.
The main message is not to be rushed. Be sure of these things :
1. Where it is
2. What it is (is it just super? - any life insurance in there?)
3. Whether transferring to KiwiSaver is the best thing to do.
Providers will promote it as a no-brainer. It isn't. It is your money and you should only transfer if it is the right thing to do.
I will have more detailed stuff in later posts, but my main general guidance at this point is to wait. The providers are now scrambling to get ready in time for 1 July. Many of them may not make it by that deadline, but that doesn't mean they're bad providers. They have been given very little to time to get the right systems in place.
Once everyone is ready, you can make a better assessment of who might be the best KiwiSaver provider to take on your Australian superannuation transfer. I would give it until the end of this year. Have a good look in 2014 - all the main KiwiSaver providers should be ready by then.
In the meantime, if you have lost track of where your Aussie super is, consider using the free Super Seeker online service from the Australian Tax Office. Here is the link:
http://www.ato.gov.au/individuals/content.aspx?doc=/content/33301.htm&alias=superseeker
I only mention this because I have noted some excitement from providers who are gearing up to charge the public to do this. Like the tax refund companies, you can do it yourself. It is all online and it isn't that hard.
In later posts, I will also ask you to consider what you might be giving up. Does your Aussie super carry with it any guarantees? For example, some funds might have built-in inflation proofing, underwritten by the Government. You will lose all of that on transfer.
The main message is not to be rushed. Be sure of these things :
1. Where it is
2. What it is (is it just super? - any life insurance in there?)
3. Whether transferring to KiwiSaver is the best thing to do.
Providers will promote it as a no-brainer. It isn't. It is your money and you should only transfer if it is the right thing to do.
Wednesday, April 24, 2013
No Surprises (in Plain English)
In The Simpsons, Homer's elderly father Abe Simpson instantly falls asleep. He doesn't just doze off...it's instant loud snoring and dribbles. Sometimes mid-sentence, while standing up.
I think most of the media do this whenever superannuation and KiwiSaver comes up.
I don't blame them. Snakes alive, it can be a boring subject. Yet I think the media has missed something recently which was, dare-I-say-it, interesting.
Bill English, the Finance Minister, said in a speech the other day (about the forthcoming Budget) : “What we are doing is well-signalled and predictable, so I don’t think you’ll see any big surprises on 16 May.”
Pretty straightforward, then. The headline message of that speech was the Government's books are on track to return to surplus in 2014/15. So that's good.
Until we cast our minds back to the Budget of 2011. At that time, English said that a form of compulsory KiwiSaver membership would come in. When? In the same fiscal year as the return to surplus, which is 2014/15. Next year.
I think this recent speech may have been a way of gently ushering in that news - without frightening the horses. If the Budget announces compulsory KiwiSaver for all employees, no doubt this will be reported as shock news. Yet Bill will tell us that it was well-signalled and predictable. And he'd be right - it was.
Whether it actually happens is up to the Government, obviously. But what surprised me was that no-one seems to have asked the question. In fact, I read one article re-iterating the no-change message.
No disrespect to Mr English in particular, but when a politician says something really straightforward - that really should ring louder-than-usual alarm bells, shouldn't it?
Wednesday, January 30, 2013
Karma Comedians
The Leader of the Opposition, David Shearer, recently said that the country "didn't need a stand up comedian as Prime Minister". I think this is a clever undermining of John Key's most attractive quality. Key comes across as likeable and he sometimes says quite funny things. This is a massively rare trait among politicians. It makes him electable.
He does appear to have a light approach - but at the same time he usually shows the appropriate level of gravitas. He also knows when to be 100% serious. This seems to come naturally.
So...Hekia Perata MP joked yesterday that a problem with the Ministry of Education's own payroll system was "karma", referring to the Ministry's problems with Novopay - the new system that pays teachers. She was so excited by her joke, she even tweeted it.
Context and placement is all-important.
Context - If you or I had said it, it would be a mildly witty comment and we would all get on with our day. What makes this different is that Hekia Perata is the Minister for Education.
Placement - She shouldn't have opened with the joke. She should have just given the information that the error was unrelated to Novopay - apologised - and reassured everyone that is was a one-off and that they were getting their pay just the one day later. Crisis over.
A journalist may well have followed up with a harsh question about the ministry and Novopay. That would have been the time to come in with the "karma" joke, or a variation of it - saying that she does not believe it is karma, followed perhaps by a good-natured chuckle.
The use of humour in politics is a minefield and few politicians have deployed it successfully over a long period. I would suggest that Perata lets her leader do the jokes from now on.
Tuesday, January 29, 2013
What is a Financial Adviser?
The regulation of financial advice is a good thing. Before July 2011, anyone could call themselves a financial adviser and promote that service to the public. Anyone.
A few weeks after landing in NZ, back in 1999 - a financial adviser (let's call him Jeff) offered me a job. This was moments after meeting me, by chance, at a family gathering. I'd like to think that I cast a spell on him with my beguiling charisma, but that wasn't it. Jeff employed young people to sell life insurance in shopping malls, from a booth. I would be paid for each "sign up". He would earn several times what he paid me from the insurance company commission. A brief chat about savings and insurance revealed that he just wanted to make money. He was quite open about that. I gave the opportunity a miss.
Jeff's business model seemed to be very successful, but he is not a financial adviser any more.
There used to be quite a few Jeffs roaming around. Those characters can no longer call themselves financial advisers. After a brief period of consternation, they exited stage left to do something else because it became too hard to make money. They were never going to study for exams, or demonstrate that they knew what they were talking about.
So now we have actual professional financial advisers. About 2,000 of them have achieved qualifications, completed the authorisation and registration process and they are now Authorised Financial Advisers (AFAs). They also must belong to an official Disputes Resolution Scheme, which gives an independent outlet for a person when things go wrong. The register of AFAs is here.
At this point, I stress that there are great advisers out there who are not AFAs. They typically specialise in the more basic insurance and savings products available. But, like the AFAs, they must clearly explain how they are paid and who by. They must also tell you the limitations of their service to you; for example - if they can only recommend one provider's products.
So (very broadly) that's the professional financial adviser. Problem solved then, eh?
Partly.
We know, don't we, that self-appointed financial advisers walk among us. They can be just as persuasive as the professionals - sometimes more so because they have no vested interest in the thing they are recommending. In recent months, I have been strongly advised to :
Invest in a particular fund offered by a particular KiwiSaver provider
Invest in leveraged foreign exchange things (that I don't understand)
Buy gold
Stop being in KiwiSaver
Quadruple my KiwiSaver contributions
Forget about life insurance
Increase my life insurance
None of this advice has come from people that know me particularly well. They are just offering well-meaning information that they have picked up. Like the Billy Bleach character on this clip. When his advice falls flat - he simply says "that's weird.." and moves on.
If you take advice from a professional financial adviser, and it goes wrong - there are avenues to go down that would help sort that out. With the self-appointed financial adviser - you're on your own.
A few weeks after landing in NZ, back in 1999 - a financial adviser (let's call him Jeff) offered me a job. This was moments after meeting me, by chance, at a family gathering. I'd like to think that I cast a spell on him with my beguiling charisma, but that wasn't it. Jeff employed young people to sell life insurance in shopping malls, from a booth. I would be paid for each "sign up". He would earn several times what he paid me from the insurance company commission. A brief chat about savings and insurance revealed that he just wanted to make money. He was quite open about that. I gave the opportunity a miss.
Jeff's business model seemed to be very successful, but he is not a financial adviser any more.
There used to be quite a few Jeffs roaming around. Those characters can no longer call themselves financial advisers. After a brief period of consternation, they exited stage left to do something else because it became too hard to make money. They were never going to study for exams, or demonstrate that they knew what they were talking about.
So now we have actual professional financial advisers. About 2,000 of them have achieved qualifications, completed the authorisation and registration process and they are now Authorised Financial Advisers (AFAs). They also must belong to an official Disputes Resolution Scheme, which gives an independent outlet for a person when things go wrong. The register of AFAs is here.
At this point, I stress that there are great advisers out there who are not AFAs. They typically specialise in the more basic insurance and savings products available. But, like the AFAs, they must clearly explain how they are paid and who by. They must also tell you the limitations of their service to you; for example - if they can only recommend one provider's products.
So (very broadly) that's the professional financial adviser. Problem solved then, eh?
Partly.
We know, don't we, that self-appointed financial advisers walk among us. They can be just as persuasive as the professionals - sometimes more so because they have no vested interest in the thing they are recommending. In recent months, I have been strongly advised to :
Invest in a particular fund offered by a particular KiwiSaver provider
Invest in leveraged foreign exchange things (that I don't understand)
Buy gold
Stop being in KiwiSaver
Quadruple my KiwiSaver contributions
Forget about life insurance
Increase my life insurance
None of this advice has come from people that know me particularly well. They are just offering well-meaning information that they have picked up. Like the Billy Bleach character on this clip. When his advice falls flat - he simply says "that's weird.." and moves on.
If you take advice from a professional financial adviser, and it goes wrong - there are avenues to go down that would help sort that out. With the self-appointed financial adviser - you're on your own.
Wednesday, January 23, 2013
KiwiSaver is More than a Party
Hidden behind the sensational headlines about what Gareth Morgan thinks about cats, was the news that the BNZ are getting ready to enter into the KiwiSaver market.
This excellent article in interest.co.nz likens their entry to someone crashing into a singles party at 1.30 am long after everyone has had enough time to find a partner.
I prefer to think of KiwiSaver as the strip of nightclubs in Ibiza. The music plays permanently from many venues and the party goes on 24//7. If you're on holiday there, you may just fall into the first one you see - but you know that you can walk out at any time and try another one.
Lets say you find a nightclub you like...you can't stop your crazy feet dancin' the night away. So you keep coming back. Then, without warning, the DJ starts to play Shakin Stevens ballads. What the..? A coach load of drunk PE teachers arrive on the dance floor and start to make fun of you. Then they double the prices at the bar.
This is going to make you want to find somewhere else to go. If a new nightclub provider turns up with a great music, friendly people and reasonable prices - you are going to go to that one instead. And so will everyone else. Apart from the PE teachers.
If they know what they're doing, the new nightclub should do very well indeed.
This excellent article in interest.co.nz likens their entry to someone crashing into a singles party at 1.30 am long after everyone has had enough time to find a partner.
I prefer to think of KiwiSaver as the strip of nightclubs in Ibiza. The music plays permanently from many venues and the party goes on 24//7. If you're on holiday there, you may just fall into the first one you see - but you know that you can walk out at any time and try another one.
Lets say you find a nightclub you like...you can't stop your crazy feet dancin' the night away. So you keep coming back. Then, without warning, the DJ starts to play Shakin Stevens ballads. What the..? A coach load of drunk PE teachers arrive on the dance floor and start to make fun of you. Then they double the prices at the bar.
This is going to make you want to find somewhere else to go. If a new nightclub provider turns up with a great music, friendly people and reasonable prices - you are going to go to that one instead. And so will everyone else. Apart from the PE teachers.
If they know what they're doing, the new nightclub should do very well indeed.
Tuesday, January 22, 2013
KiwiSaver maturity - end of story?
When your KiwiSaver account matures - for most of us this is at NZ Super eligibility age (currently 65) - you can have all the money. No tax. It's all yours. Woo, and indeed, hoo!
Some older people that joined KiwiSaver when it started had to be in KiwiSaver for 5 years, even though they reached their 65th birthday a while ago. I have already had two people tell me about their KiwiSaver windfalls on this Summer's barbecue circuit.
It's fair to say that they were cock-a-hoop. They only had 5 years of contributions, so it wasn't ever going to be their main retirement fund...but they did the maths and saw a handsome return in comparison to what they paid in. A nice treat was bought and paid for - and good on them.
But did they do the right thing there?
What happens to KiwiSaver once you reach maturity is quite good. You don't have to take out all the money if you don't need it all right now. It can remain invested for as long as you like. With many providers, you can even take out the investment earnings and leave the capital amount in there. It's up to you.
If you take all your KiwiSaver money out straight away, you can't join KiwiSaver again.
Once your KiwiSaver account matures, it becomes "on call" - accessible at any time. In that way, it continues to be useful, well into retirement.
Indeed, if you are around this age and you have other long-term savings vehicles, like a unit trust plan or a personal superannuation scheme - you could even look at throwing that money over to KiwiSaver. So if the KiwiSaver has not a lot in it, you can give it a boost with extra money from the other savings plans.
Why? The admin and management fees are generally much, much lower in KiwiSaver. Simple as that. Why pay more for essentially the same thing? Check this point with your provider and take their financial advice if you think this applies to you.
Some older people that joined KiwiSaver when it started had to be in KiwiSaver for 5 years, even though they reached their 65th birthday a while ago. I have already had two people tell me about their KiwiSaver windfalls on this Summer's barbecue circuit.
It's fair to say that they were cock-a-hoop. They only had 5 years of contributions, so it wasn't ever going to be their main retirement fund...but they did the maths and saw a handsome return in comparison to what they paid in. A nice treat was bought and paid for - and good on them.
But did they do the right thing there?
What happens to KiwiSaver once you reach maturity is quite good. You don't have to take out all the money if you don't need it all right now. It can remain invested for as long as you like. With many providers, you can even take out the investment earnings and leave the capital amount in there. It's up to you.
If you take all your KiwiSaver money out straight away, you can't join KiwiSaver again.
Once your KiwiSaver account matures, it becomes "on call" - accessible at any time. In that way, it continues to be useful, well into retirement.
Indeed, if you are around this age and you have other long-term savings vehicles, like a unit trust plan or a personal superannuation scheme - you could even look at throwing that money over to KiwiSaver. So if the KiwiSaver has not a lot in it, you can give it a boost with extra money from the other savings plans.
Why? The admin and management fees are generally much, much lower in KiwiSaver. Simple as that. Why pay more for essentially the same thing? Check this point with your provider and take their financial advice if you think this applies to you.
Monday, January 21, 2013
Ethical investing in KiwiSaver
This is not a contradiction in terms. You don't have to invest in pornography, gambling, tobacco, weapons or Cliff Richard to make money. You can invest ethically.
Hang on a minute - Cliff isn't unethical, is he? Not as far as I'm concerned. But I know people who would disagree. Strongly.
Perhaps I am being flippant, but I am making a point here.
I can say with total confidence that my ethical standards are not exactly the same as your ethical standards. Neither of us are necessarily right or wrong - we have complex ethical coding programmed into us over decades. Family, friends, teachers, work colleagues and everyone else have contributed to this and as a result of all of that - we now have You and what You think is OK.
So how can a fund manager hope to produce a fund that invests in all the things that You are comfortable with?
To make this even harder, it is common for an active fund manager to keep their investment choices secret. Why? Well, they spend a great deal of time and money on research. If they told you which companies they liked - you (or a competing provider) could just copy it, and save a heap on fees. It's commercially sensitive information.
So with KiwiSaver, a compromise is to look at the passive investment style. That is, the money you invest tracks an index (like the NZX50) without making a judgement call on which companies are going to perform the best. Your investments goes up or down with the movement in that index.
An active fund manager makes these judgements every day in the hope that they will beat the index.
The active manager may decide to invest heavily in a company that doesn't meet your ethical standards. That's because the active manager will be looking to see which companies are going to deliver a good return - they do not pause to think whether this is ethically OK, unless they declare otherwise.
With passive investing, you are not avoiding the unethical companies, but you are not actively investing extra money in them either - in order to make more money. It's a compromise until we get to the day when we can easily mix & match our own KiwiSaver investment decisions online.
Whether this is enough of a compromise depends on You.
Hang on a minute - Cliff isn't unethical, is he? Not as far as I'm concerned. But I know people who would disagree. Strongly.
Perhaps I am being flippant, but I am making a point here.
I can say with total confidence that my ethical standards are not exactly the same as your ethical standards. Neither of us are necessarily right or wrong - we have complex ethical coding programmed into us over decades. Family, friends, teachers, work colleagues and everyone else have contributed to this and as a result of all of that - we now have You and what You think is OK.
So how can a fund manager hope to produce a fund that invests in all the things that You are comfortable with?
To make this even harder, it is common for an active fund manager to keep their investment choices secret. Why? Well, they spend a great deal of time and money on research. If they told you which companies they liked - you (or a competing provider) could just copy it, and save a heap on fees. It's commercially sensitive information.
So with KiwiSaver, a compromise is to look at the passive investment style. That is, the money you invest tracks an index (like the NZX50) without making a judgement call on which companies are going to perform the best. Your investments goes up or down with the movement in that index.
An active fund manager makes these judgements every day in the hope that they will beat the index.
The active manager may decide to invest heavily in a company that doesn't meet your ethical standards. That's because the active manager will be looking to see which companies are going to deliver a good return - they do not pause to think whether this is ethically OK, unless they declare otherwise.
With passive investing, you are not avoiding the unethical companies, but you are not actively investing extra money in them either - in order to make more money. It's a compromise until we get to the day when we can easily mix & match our own KiwiSaver investment decisions online.
Whether this is enough of a compromise depends on You.
Sunday, January 20, 2013
Shedgate
Advertising savings products is always a challenge because it's in abstract thing. It means different things to different people. You can't really show a wheelbarrow full of money being pushed by someone with grey hair, who's laughing his head off.
The now defunct finance companies advertised aggressively directly to the people and I think this is where they inflicted the most damage. I wince at the memory of the Hanover TV ads, for example. They were very persuasive and soothing. One was about a shed on a farm that weathered several storms over many years.
What was particularly insulting was that the advertising agency would have created the ad after listening to Hanover about who the target market was. So they went with "a rural bloke talking about his old shed". And then it was implied heavily that Hanover was "just like that old shed". That's about as much detail as they thought their prospective customers could handle. They will have decided that, on purpose, in meetings.
The irony is that the old shed is probably still there, whereas Hanover has gone.
Hang on though...did the shed even exist in the first place? Given what has gone on, it's a fair question.
This is of course a minor quibble compared to the hardship suffered by those who lost their savings and I don't mean to make light of that at all
However, it is worth noting that anyone who wants your money and advertises like Hanover did or they get all soft-focus and sentimental, like the old Werthers Original TV commercials - then I would raise your eyebrow and keep it raised until they offer something of substance.
Medical Treatment via KiwiSaver
This article caught my eye today. It tells the story of Peter and Kate McKenzie-Bridle - a couple that used a little-known provision within KiwiSaver to access money to pay for a medical procedure (in this case a cochlear implant) for their 6 year old daughter.
This family were not in financial hardship, but the $30,000 cost would have put them into debt and, quite rightly, they wanted to avoid debt.
What I particularly like about this story is that the McKenzie-Bridles used their legal expertise to successfully argue a case for the withdrawal. But they didn't stop there - they made the details of their case public in order to make future withdrawals easier for other people who may need this provision. They also raise awareness for cochlear implant funding.
This will have a real impact among KiwiSaver providers and the independent trustees that review and approve such applications.
It highlights an issue that I think needs addressing. While the family seem to have had a good experience with their provider, Fisher Funds (no relation) and Trustees Executors - it is entirely possible that another provider/another trustee may not have approved it because the provisions within the legislation for early withdrawal are open to interpretation. How many other similar cases are out there?
In theory, if the family hadn't received the decision they wanted, the KiwiSaver fund could be transferred to another provider, and an application then made to the new provider - and so on - until someone said yes. That process could take years.
This is not an ideal state of affairs, in my view.
I believe that the decision making on such matters should be centralised to avoid inconsistency among providers over interpretation of the legislation. Providers would then be providing the scheme - which is, literally, their role.
This family were not in financial hardship, but the $30,000 cost would have put them into debt and, quite rightly, they wanted to avoid debt.
What I particularly like about this story is that the McKenzie-Bridles used their legal expertise to successfully argue a case for the withdrawal. But they didn't stop there - they made the details of their case public in order to make future withdrawals easier for other people who may need this provision. They also raise awareness for cochlear implant funding.
This will have a real impact among KiwiSaver providers and the independent trustees that review and approve such applications.
It highlights an issue that I think needs addressing. While the family seem to have had a good experience with their provider, Fisher Funds (no relation) and Trustees Executors - it is entirely possible that another provider/another trustee may not have approved it because the provisions within the legislation for early withdrawal are open to interpretation. How many other similar cases are out there?
In theory, if the family hadn't received the decision they wanted, the KiwiSaver fund could be transferred to another provider, and an application then made to the new provider - and so on - until someone said yes. That process could take years.
This is not an ideal state of affairs, in my view.
I believe that the decision making on such matters should be centralised to avoid inconsistency among providers over interpretation of the legislation. Providers would then be providing the scheme - which is, literally, their role.
Friday, January 11, 2013
Yesterday's Gone
Fleetwood Mac were right on that one. They were very wrong about thunder only happening when it's raining, but they are right about the gone-ness of yesterday.
In the world of financial services, there is a real problem with the past. On the one hand, the investment advice given is often supported by what has happened in the past. And then it is said quite solemnly that "past performance is not to be taken as a guide to future performance".
The public hate that kind of disclaimer. They really do.
The brutal truth is that no-one knows what is going to happen in the future. It drives us mad, but that is literally how it is. We really need to get a grip on that concept. You can control the level of fees that you pay, but you can't know for sure which funds are going to be the best.
One thing to watch for are the charts used as a sales aid that track $1 invested in, say, 1900 like this one and how much they'd be worth now if they were invested in shares, property, cash or bonds. The figures always look really impressive for shares.
This is what such charts can't show:
1. They can't make any assumptions for tax (it's too hard), so they assume that all growth is tax-free.
2. They can't make any assumptions for fees (it's too hard), so it is assumed that all growth has had no fees come off them.
3. They overlook the fact that it is impossible for a retail investor to have invested in one managed fund product for that entire time.
Other than that, they're fine (!).
My take on this is that for most of us KiwiSaver is something we are going to rely on and, for me personally, I don't fancy being talked into an expensive, highly volatile fund - especially when employers and the Government have added a generous return to my fund already. When I have extra money knocking around that I can afford to lose, I'll let you know.
In the world of financial services, there is a real problem with the past. On the one hand, the investment advice given is often supported by what has happened in the past. And then it is said quite solemnly that "past performance is not to be taken as a guide to future performance".
The public hate that kind of disclaimer. They really do.
The brutal truth is that no-one knows what is going to happen in the future. It drives us mad, but that is literally how it is. We really need to get a grip on that concept. You can control the level of fees that you pay, but you can't know for sure which funds are going to be the best.
One thing to watch for are the charts used as a sales aid that track $1 invested in, say, 1900 like this one and how much they'd be worth now if they were invested in shares, property, cash or bonds. The figures always look really impressive for shares.
This is what such charts can't show:
1. They can't make any assumptions for tax (it's too hard), so they assume that all growth is tax-free.
2. They can't make any assumptions for fees (it's too hard), so it is assumed that all growth has had no fees come off them.
3. They overlook the fact that it is impossible for a retail investor to have invested in one managed fund product for that entire time.
Other than that, they're fine (!).
My take on this is that for most of us KiwiSaver is something we are going to rely on and, for me personally, I don't fancy being talked into an expensive, highly volatile fund - especially when employers and the Government have added a generous return to my fund already. When I have extra money knocking around that I can afford to lose, I'll let you know.
Wednesday, January 9, 2013
KiwiSaver Fees - WEP?
An older gentleman I used to work with had a joke every time the payslips were handed around. Holding up his payslip, he would look confused and say "does anyone else have this code WEP on their slip?". He would then inspect the small print and "ah! it's all right...it's explained here...it means Worth Every Penny". I guess you had to be there.
Most of us don't really assess whether KiwiSaver fees really are worth every penny (cent) - especially in the early days when there's nothing much in there. With financial products like KiwiSaver, fees just kinda happen. They are deducted from the fund as it builds. Besides, aren't they all about the same?
Those that have seen my Quick Guide to KiwiSaver Fees here will have noticed that KiwiSaver providers do charge different levels of fees. It's a competitive world - and there's nothing wrong with that. KiwiSavers can change provider very easily.
What the Sorted fee calculator shows us is that likely impact on your balance at age 65. In the example on the video, the fee range is from 14.5% to 4.6%. So if you build up a fund of $200,000, you might have paid $29,000 in fees. Or if you were with a different provider, you might have paid only $9,200. Both figures seem high...especially when investment statements tend to express the fees in terms of the annual % fee charge, which is usually under 1% .
What's happening here is just mathematics. As you build up funds, growth happens on the growth. This compounding growth is like a cartoon snowball rolling down a hill, getting ever bigger by its own momentum, which makes your fund much larger. Happy days for your fund. Yet...the same principle also applies to the fees that are taken away.
If you are paying higher fees, you need to be confident that you are getting value for money. Sorted cannot predict which provider or scheme is going to be the best at growing your money (no-one can).
So we turn to the things we can control. In KiwiSaver, it's the level of fees you pay. Now, your provider can't just reduce the fees for you because they think you're great. If they did that, they would probably have to it for every member.
Using Sorted, you can compare against other providers - even other funds with the same provider - and see whether you are happy with the fee levels.
The good news is that some new regulations over fee disclosures are on their way. The fees will be explained far more clearly with effect from April 2013 - across the board. So look out for the publicity around that and make sure that you are happy with the fees being charged by your provider.
If you have been in KiwiSaver for a few years, your snowball is well on its way. So the fee levels are beginning to make a bigger difference.
Most of us don't really assess whether KiwiSaver fees really are worth every penny (cent) - especially in the early days when there's nothing much in there. With financial products like KiwiSaver, fees just kinda happen. They are deducted from the fund as it builds. Besides, aren't they all about the same?
Those that have seen my Quick Guide to KiwiSaver Fees here will have noticed that KiwiSaver providers do charge different levels of fees. It's a competitive world - and there's nothing wrong with that. KiwiSavers can change provider very easily.
What the Sorted fee calculator shows us is that likely impact on your balance at age 65. In the example on the video, the fee range is from 14.5% to 4.6%. So if you build up a fund of $200,000, you might have paid $29,000 in fees. Or if you were with a different provider, you might have paid only $9,200. Both figures seem high...especially when investment statements tend to express the fees in terms of the annual % fee charge, which is usually under 1% .
What's happening here is just mathematics. As you build up funds, growth happens on the growth. This compounding growth is like a cartoon snowball rolling down a hill, getting ever bigger by its own momentum, which makes your fund much larger. Happy days for your fund. Yet...the same principle also applies to the fees that are taken away.
If you are paying higher fees, you need to be confident that you are getting value for money. Sorted cannot predict which provider or scheme is going to be the best at growing your money (no-one can).
So we turn to the things we can control. In KiwiSaver, it's the level of fees you pay. Now, your provider can't just reduce the fees for you because they think you're great. If they did that, they would probably have to it for every member.
Using Sorted, you can compare against other providers - even other funds with the same provider - and see whether you are happy with the fee levels.
The good news is that some new regulations over fee disclosures are on their way. The fees will be explained far more clearly with effect from April 2013 - across the board. So look out for the publicity around that and make sure that you are happy with the fees being charged by your provider.
If you have been in KiwiSaver for a few years, your snowball is well on its way. So the fee levels are beginning to make a bigger difference.
Monday, January 7, 2013
KiwiSaver Fees
Back in the eighties, a colleague sent a letter (remember them?) to a client suggesting that they could, if they want, pay their fees "anally, rather than quarterly". Rather brilliantly, the client responded that they were happy to continue paying through the nose!
Fees are very important, particularly in KiwiSaver. For employees, most people are paying small contributions regularly. At the same time, small and regular fee deductions are made.
Fees tend to be charged in two broad ways; a set $ admin fee and a % deduction also comes off to pay for the investment management, the trustee and distribution costs.
If the set $ admin fee is low - that doesn't mean that you are paying low fees across the board. This is all due to be made much simpler in April 2013 - but in the meantime, there is a way you can check that for yourself.
My Truly Independent Quick KiwiSaver Fee Guide on YouTube shows you how.
You might discover that you are paying relatively high fees. That is not necessarily a bad thing. If you are in a specialist/boutique KiwiSaver fund, then those do tend to be more expensive to run. If that provider is delivering for you, then perhaps they're well worth it.
Having said that, if your fund turns out to be very expensive compared to others and you can't see why...then you are perfectly entitled to ask your provider to explain. This is all publicly available information.
Fees are very important, particularly in KiwiSaver. For employees, most people are paying small contributions regularly. At the same time, small and regular fee deductions are made.
Fees tend to be charged in two broad ways; a set $ admin fee and a % deduction also comes off to pay for the investment management, the trustee and distribution costs.
If the set $ admin fee is low - that doesn't mean that you are paying low fees across the board. This is all due to be made much simpler in April 2013 - but in the meantime, there is a way you can check that for yourself.
My Truly Independent Quick KiwiSaver Fee Guide on YouTube shows you how.
You might discover that you are paying relatively high fees. That is not necessarily a bad thing. If you are in a specialist/boutique KiwiSaver fund, then those do tend to be more expensive to run. If that provider is delivering for you, then perhaps they're well worth it.
Having said that, if your fund turns out to be very expensive compared to others and you can't see why...then you are perfectly entitled to ask your provider to explain. This is all publicly available information.
Sunday, January 6, 2013
Truly Independent Quick Info about KiwiSaver on YouTube
The holiday weather has been so sensational that I thought I would start my YouTube videos a bit earlier than planned.
"Planned?" I hear you say with an incredulous tone. Yes indeed - everything that appears on the internet from Truly Independent Financial Advice New Zealand Limited is part of a meticulously-planned, 21st Century style cyber-campaign. If it looks a bit rough, well, that's the branding I'm after so that means it's working.
"KiwiSaver Quick Info Videos?" I hear you say - again, with a tone that suggests that this is a ridiculous idea. Let me explain:
Over the next few weeks, I am going to share information with you about KiwiSaver. It'll be in bite-sized chunks because more than a minute or so about KiwiSaver can get a bit dull. So I am going to keep them short, snappy and relevant.
This one is about how much to save for retirement . It's probably going to be my most scenic film, so enjoy it while it lasts. Basically, the answer is a big fat "dunno" because how much you need to live on and how much you need to save is a very personal thing. And unlike most Authorised Financial Advisers, I do not claim to be able to see into the future beyond my next cup of tea.
So one way to do it is to pretend that today is your 65th birthday, and you would ideally like to stop working. How long would your savings last, if you have any? The good news is that you are entitled to income from your NZ Super . But how long would you last on that? If the answer is "about 10 minutes", then obviously you need to put some more money aside. KiwiSaver is a great way to do that.
This next one is about KiwiSaver and children. Quick information here about what happens when a child joins KiwiSaver. Basically, the Government throws in $1,000 and that stays there until they are entitled to NZ Super. That's a long time, but that's also a long time to build up a useful pot of money.
This will be particularly helpful to them when they want to buy their first home. If you have put extra money in, that money plus the investment earnings is accessible to help them buy a first home.
Enrolling children has to be done with a form at the provider. Get your own and your child's original birth certificate. Also, arrange for the IRD to give them their own IRD number. That way, their investment earnings are taxed at the right rate.
"Planned?" I hear you say with an incredulous tone. Yes indeed - everything that appears on the internet from Truly Independent Financial Advice New Zealand Limited is part of a meticulously-planned, 21st Century style cyber-campaign. If it looks a bit rough, well, that's the branding I'm after so that means it's working.
"KiwiSaver Quick Info Videos?" I hear you say - again, with a tone that suggests that this is a ridiculous idea. Let me explain:
Over the next few weeks, I am going to share information with you about KiwiSaver. It'll be in bite-sized chunks because more than a minute or so about KiwiSaver can get a bit dull. So I am going to keep them short, snappy and relevant.
This one is about how much to save for retirement . It's probably going to be my most scenic film, so enjoy it while it lasts. Basically, the answer is a big fat "dunno" because how much you need to live on and how much you need to save is a very personal thing. And unlike most Authorised Financial Advisers, I do not claim to be able to see into the future beyond my next cup of tea.
So one way to do it is to pretend that today is your 65th birthday, and you would ideally like to stop working. How long would your savings last, if you have any? The good news is that you are entitled to income from your NZ Super . But how long would you last on that? If the answer is "about 10 minutes", then obviously you need to put some more money aside. KiwiSaver is a great way to do that.
This next one is about KiwiSaver and children. Quick information here about what happens when a child joins KiwiSaver. Basically, the Government throws in $1,000 and that stays there until they are entitled to NZ Super. That's a long time, but that's also a long time to build up a useful pot of money.
This will be particularly helpful to them when they want to buy their first home. If you have put extra money in, that money plus the investment earnings is accessible to help them buy a first home.
Enrolling children has to be done with a form at the provider. Get your own and your child's original birth certificate. Also, arrange for the IRD to give them their own IRD number. That way, their investment earnings are taxed at the right rate.
Saturday, January 5, 2013
Balderdash from the world of sales #2
Pulling emotional triggers in sales are becoming more prevalent and it's something to watch for when corporations are trying to get your money or attention.
Some of these guys will stop at nothin' to get you blubbin'.
If you have been in any sales role ever, you may well have seen the short film about Johnny the Bagger. It's an inspirational customer service film available on you tube. It's actually from an organisation that does sales presentations to American companies.
It tells the story of a young man who, inspired by a sales presentation about going the extra mile, slipped his own "thought for the day" notes inside the bags of shoppers as he packed their shopping in the supermarket where he worked. Apparently, this initiative led to huge queues of people at the checkout counter where he was. You see, they all wanted his note in their bag.
I saw this film, once again, a few months ago at a sales conference. I say "once again" because I have somehow contrived to see this clip at least 6 times in my working life.
Johnny the Bagger has Down Syndrome. As the producers of the video well know, this information changes everything.
There is troubling stuff going on here on a couple of levels. Like many with Down Syndrome, it sounds like Johnny takes on information very sincerely and is eager to please. He was inspired by the sales presentation so much that he has taken the initiative to write these notes in his spare time.
The store manager seems to enjoy that he has someone doing a whole lot of unpaid work, bringing in all these customers - he tells the sales presenter how successful it's been, who in turn takes the credit for inspiring Johnny in the first place. And now she is all over the Internet and conferences, sharing the story. The DVD package costs $995 USD.
So who is this exceptional young man who changed the culture of this supermarket? Johnny himself remains an enigma. We are assured that Johnny is a real person and the supermarket is real. So why is the supermarket so coy? It would only take the briefest of explanations.
Each time I see it ask myself (and now you) whether this is a horrible example of exploitation of someone with Down Syndrome, or Down Syndrome itself, or is it just a load of old cobblers?
The video might be sincere, straight-up Truth. But it doesn't come across that way. The real people, talking to camera, would be 100 times more effective. Why didn't they do that?
In conclusion, this is balderdash because it has an overbearing whiff of something not-quite-right. Without the pulling of so many emotional triggers, that fact would be rather too obvious.
Thursday, January 3, 2013
Safer than Houses
There seems to be an awful lot of houses for sale at the moment. On a break in the Coromandel, even my 6 year-old daughter noticed how many, compared to when we were there last year.
It serves to remind us that houses aren't always "liquid". When you need to sell your house, there needs to be people around who want to buy it. If you need the proceeds urgently, you might find yourself making compromises. That's another financial hazard. Investing money in something that you can't have access to when you need it.
Long-term investments like property tend to deliver over time and KiwiSaver is certainly similar in that respect. However, I think they are different enough to treat differently. Know what I mean? No? OK, I will put it another way then.
Once you get to a time when you are entitled to take your KiwiSaver benefit, you are not relying on the market to be able to cash it in. It's yours. It's there. If it's not enough, you can leave it in for a little longer or pay some extra money in.
Most of us are paying into a mortgage and we do that because the long-term promise is that we will make a good return and we need to pay for the place we live in, too. That's already a long-term, volatile and high risk investment. We sort of know how that works and we have got used to it.
What if your KiwiSaver provider said that you couldn't have your money at retirement? And you had to wait until they could find a "buyer"? You'd be outraged. And that's even before we talk about the actual investment return.
Think about your mortgage and perhaps balance that long-term investment with your other long-term investment, KiwiSaver. KiwiSaver incentives already give a great return before the money starts to be invested. If you are relying on KiwiSaver for a good retirement, going high-risk, high volatility isn't always the answer.
It serves to remind us that houses aren't always "liquid". When you need to sell your house, there needs to be people around who want to buy it. If you need the proceeds urgently, you might find yourself making compromises. That's another financial hazard. Investing money in something that you can't have access to when you need it.
Long-term investments like property tend to deliver over time and KiwiSaver is certainly similar in that respect. However, I think they are different enough to treat differently. Know what I mean? No? OK, I will put it another way then.
Once you get to a time when you are entitled to take your KiwiSaver benefit, you are not relying on the market to be able to cash it in. It's yours. It's there. If it's not enough, you can leave it in for a little longer or pay some extra money in.
Most of us are paying into a mortgage and we do that because the long-term promise is that we will make a good return and we need to pay for the place we live in, too. That's already a long-term, volatile and high risk investment. We sort of know how that works and we have got used to it.
What if your KiwiSaver provider said that you couldn't have your money at retirement? And you had to wait until they could find a "buyer"? You'd be outraged. And that's even before we talk about the actual investment return.
Think about your mortgage and perhaps balance that long-term investment with your other long-term investment, KiwiSaver. KiwiSaver incentives already give a great return before the money starts to be invested. If you are relying on KiwiSaver for a good retirement, going high-risk, high volatility isn't always the answer.
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