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Some need to know, with a bit of WealthDesign nice to know thrown in.

The KiwiSaver HomeStart grant is designed to help eligible first home buyers with a grant up to $5,000 per individual towards an existing home, or up to $10,000 for a new build. This, on top of the ability to access their KiwiSaver scheme balance, has helped thousands of kiwis buy their first home.  There are around 140 grant applications per week processed by Housing New Zealand.

It’s great, in fact it’s brilliant in my opinion, but there is a problem. The applications get declined – at a rate of one in twenty!  That is 28 applications per week, where potential first home owners are left bitterly disappointed.

This can be for a number of reasons such as already owning land or property, living with someone who has an interest in a property or just not getting the application in on time. It can be mistakes by lawyers not getting the paperwork into Housing New Zealand in time or just sloppy handling of a vital piece of the puzzle.  Another overlooked issue is that KiwiSaver investors have had to pay a minimum of 36 regular payments, and KiwiSaver payment holidays can mean applications are being declined.

These people may miss out and may never get the chance again. Once settlement has occurred, you can’t access your KiwiSaver balance, or the grant. There are numerous stories of people going into unconditional contracts to settle on homes, only to find they can’t access their KiwiSaver scheme balances, leaving them short of cash on settlement day. An example was a guy who had transferred his Australian superannuation to his KiwiSaver, not knowing that he couldn’t use these funds to purchase a house. He happily went unconditional, but couldn’t access all of his KiwiSaver, leaving him short on settlement day. Again, people don’t know that they can’t use their Australian superannuation to buy a first home, even if it is in their KiwiSaver scheme.

My advice is to talk to someone who knows what the rules are. Don’t leave the paperwork to your lawyer; you control the process, to ensure you don’t receive a shocking surprise on settlement day.

We are happy to help with advice – forewarned is forearmed, so give us a call, and we’ll talk you through the process.

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John Barber
WealthDesign – a life well planned

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After almost 30 years in the financial services industry I am a firm believer that investing is not a paint by numbers sort of deal, and that investors don’t all fit in some theoretical box. The investment theory is we are all somewhere on a ‘risk’ scale; from a conservative investor to an aggressive investor. You only need look at the design of the KiwiSaver schemes to understand how this theory is reinforced.

What the theory doesn’t take into consideration is people. We are a weird bunch and we are all different. We have different abilities to understand and handle volatility (so called risk, when our asset values go up or down). Understandably we like it when our assets appreciate in value, and hate it when their value goes down. We also have different time frames and different balance sheets. We also have different abilities to manage investments.

The theory doesn’t take into consideration timing. Timing is really important. There are times when it’s great to be a conservative investor and have lots of investments in bonds or fixed interest. Then there are times when even these defensive investments do not reward the investor for the risk they are taking.

Now is one of those times. If you consider a moderate bond portfolio will only be yielding around 4% and there is a risk of capital loss, why would you invest in bonds at this time (especially when bank deposit rates are around 3.6% and there is very little chance of capital loss)?

We are all different, so personalised advice is vital. Get an adviser on your team who looks at your whole financial picture and gives you advice that suits you – not tells your which ‘box’ you fit into, providing an off the shelf, ‘she’ll be right’ solution.

An adviser with a wrinkle or two helps, as being in this industry for a while means they’ve been through the financial cycles, and if they are still here, they must be doing something right! Knowledge and experience will definitely be the way to go when it comes to investing in your future.

Give me a call today, and see how a great investment strategy can help you to reach your financial goals. Our first session together is complimentary; in that time you can decide if working with me, will work for you.

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John Barber
WealthDesign – a life well planned

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Mixed messages we receive

Kiwis are in love with owning their own piece of paradise. We like to own our own homes. We’re a nation of number eight wire, DIYers, that love to take on a project. Property is also a robust pillar of a smart retirement plan.

Owning your own home teamed with having a healthy KiwiSaver balance, means you will increase the chance of living the life you are planning for, after 65.

The Retirement Commissioner (and everyone else who thinks we should know) is telling us we are going to live longer, plus we’re having smaller families, so we can’t rely on government super to live on, in our old age.

The government recognises this and has put in a pretty good plan to help. You now can access your KiwiSaver balance and get a free grant to help buy your first home.

Yet the Reserve Bank have forced banks to increase the deposits people need to buy their first home. Who does this hurt? Mainly 20 and 30 year olds as they’re in that first home buying space. Who does this protect? Mainly the banks from themselves. Deposit restrictions mean the banks have more fat if a person defaults on a loan lending. Does this help the borrower? Not really, but it’s great for the banks (and their thriving profits).

Silver suits will appear on TV to tell us all what a great thing they are doing on our behalf. Hmm – I must be starting to become a cynic!

Just one of the mixed messages we receive on a daily basis.

Stay current with what’s having an impact on your financial health. Call us. No question is a silly one.

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John Barber
WealthDesign – a life well planned

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Ethical KiwiSaver Investments

It has been interesting to watch the debate around ethical investing within KiwiSaver. I am a believer in investors knowing where their money is, and unfortunately most managed funds don’t allow any real knowledge of where the funds eventually get invested. They will spin the line about more governance and how they are different/ better than the other bloke. The truth is, unless you can see for yourself, it’s all just marketing.

At WealthDesign we have investment clients who wouldn’t own shares in gambling or industries such as arms or tobacco or industries they believe are damaging our environment. I respect that, and am happy to design options that exclude.

You can be an ethical investor and still save for your retirement effectively. For example, you could have invested in Australasian Listed Property over the past five years and done very well. According to Morningstar, investors would have received a 16% return over this time.

Like most New Zealanders, I like property. The rent gives a stable income flow, and property tends to follow inflation. If commercial property inflation averages 3.5% for 10 years, the asset value will normally increase by 50%. Not a bad way of ethical investing in my opinion.

At WealthDesign we see there’s a need to audit investors’ KiwiSaver accounts.  So we’ve created KiwCheck. This service is independent of any KiwiSaver manager and is designed to provide personalised advice based on independent research. We believe the banks and fund managers are conflicted as they have a vested interest in keeping people paying into their schemes (and keep getting their share of the $132 million paid in fees). Our service isn’t about moving investors from one provider to another, but is about checking that KiwiSaver is working optimally for you.

We believe transparency and knowledge is vital, plus we are all about making the complicated simple.  KiwiCheck is just another way we can help our clients to live their life, on their terms.

Give us a call if you want to know more about ethical investing or KiwiCheck on 
06 3555844.  

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John Barber
WealthDesign – a life well planned

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Fun with words

If you watch the Big Bang Theory, my favourite programme ever (apart from Dukes of Hazzard –  nothing is better than that!), you’ll know about Sheldon’s cable show ‘fun with flags’.

Well recently some people have been having ‘fun with words’.  People have been talking about ‘putting clients’ interests first’.  That this was even a discussion was a bit of a revelation for the team at WealthDesign, because we never realised it was a new thing.

The basic idea is that where the outcome for the adviser and the client are in conflict, the right thing to do is ensure the outcome favours the client.  Do the right thing and so on.  Rob Everett from the FMA recently said that ‘clients’ interests first’ “can mean different things to different people, in different situations”.

No, it doesn’t.

I prefer a higher standard – ‘clients’ best interests first’.  This one can be much harder to meet if you can only sell one or two product lines, rather than compare and choose from a wide range of providers and products.

For example, if you go into a bank that sells its own KiwiSaver, and the teller suggests you change to that KiwiSaver, they are considered to be putting your interests first, because they don’t receive a commission for making that sale.  The bank product is not being chosen by the teller over another product, because they can’t sell any other product, so there is no conflict.

What if that bank’s KiwiSaver has much higher fees than the one it replaced?  It might have much poorer returns (we know which KiwiSaver schemes have consistently underperformed) than the one it replaced.  The bank teller doesn’t compare the old scheme to their one.  They won’t give a written statement of advice outlining the pros and cons of switching.  They won’t tell you that their salary-not-commission job is tied to targets, bonuses and KPIs that require them to sell things. They are having ‘fun with words’, at your expense.  That sale would not meet the standard of ‘clients’ best interests’. 

And this is the problem.

If you go to a doctor or a lawyer, and they said to you “just so we’re clear – my duty is to put your interests first, but I won’t necessarily be acting in your best interests”, would you take their advice?

At WealthDesign when we say we put our clients’ best interests first, we think it means what you think it means.

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Regan Thomas
WealthDesign – a life well planned

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