WealthDesign

The government is selling down their shareholding in Air New Zealand (AIR) and I think this is a great idea. Not because I am a great fan of assets sales, but if I owned 75% of Air New Zealand, I would sell and take profits as well.

AIR has sold on the market over the past 12 months between $ 1.02 and $1.54. The sell down is at $1.60 or better. AIR has performed really well over the past couple of years and has increased revenue by 3.6% and reduced costs by 3%.  The problem I have with AIR is their debt level is around 67% and they are in a business that is very competitive and fuel price sensitive. You only need look at the research for 2009 to see the negative impact on cash flow from strong fuel prices and falling passenger numbers.

As tax payers we bailed out AIR  when they needed it, now let’s take the profit when it’s on the table.

John Barber

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Research shows that human behaviour and investing mistakes are closely linked.

• Investors like to chase high past returns.
• Fund management companies love to advertise strong past performance.
• High past returns are often poor predictors of future returns.

Fund managers get paid on the amount of money they manage. In fact some even go so far as to pay themselves a bonus when the market goes up. As advisers we want our clients to take the least amount of capital risk, while still allowing them to reach their financial goals.

The paradox is that financial advisers are here to advise and to help people avoid the pitfalls of investing, yet two thirds of KiwiSaver fund managers don’t want financial advisers involved in the retirement planning process, and will not deal with anyone unless they are tied and bound to their company.

The next time you see a well dressed fund manager telling you what great returns they achieved last year – don’t fall for the spin.  Go find an adviser who can provide you with truly independent research. Be an informed investor, not a cash cow for the fund management industry.

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As we all know, Meridian Energy IPO is well underway.  I like investing in power companies such as Contact Energy, Mighty River and now Meridian Energy.

I was once told, buy shares in companies that have monopolistic traits that make money in good times and bad. These companies should be in a sector that have barrier to entry for competitors, and they should also own assets that appreciate with inflation. Guess what, even on a bad day, we all turn on the lights and power consumption continues to increase. You can’t easily build a new power station and existing energy infrastructure has a long life span.

My advice is never to bet the house on one share, however, power company shares are worth buying in a diversified share portfolio.

John 

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Research shows that there are fewer than 1800 financial advisers authorised to give personalised financial advice in New Zealand. The scary thing is,  of these only around 360 are non-aligned or not linked to product providers, banks or insurance companies.  This minority aren’t allowed to advertise that they are independent.  So where do you go to get impartial, quality advice?

In my opinion, being authorised might allow you to give advice but this shouldn’t be the minimum level of qualification one should have, to provide quality advice. There has always been an education pathway before the latest round of regulations.  People should look for those advisers who believe in further education and who have demonstrated this by becoming either a CLU or CFP. These designations carry a higher qualification that AFA, providing their clients with the best quality advice in the market.

I advise you to ask what qualifications your potential financial adviser has.  It’s your life, so shop around to make sure you have the best adviser, someone that you’re comfortable with, and who is well qualified. 

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The increasing number of retirees and the increasing longevity of these retirees will create opportunities and challenges. Expect to see changing spending patterns within the economy as the power of the grey wave starts to hit. Healthcare, travel and entertainment will be likely winners.

The investment conclusion from all of this, the grey wave is going to want more income assets that provide long term inflation hedging.

For more information about planning into your future, give us a call.

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